Using the data in the following table, and the fact that the correlation of A and B is 0.29, calculate the volatility (standard deviation) of a portfolio that is 60% invested in share A and 40% invested inshare B. Click on the icon located on the top-right corner of the data table below to copy its contents into a spreadsheet.Realised ReturnsYearShare AShare B2007- 14%14%200820099%3%31%7%2010- 2%- 1%20112%- 6%20128%16%The standard deviation of the portfolio is ☐ %. (Round to two decimal places.)

SOLUTION. To calculate the volatility (standard deviation) of the portfolio, we first need to…

Answered: Using the data in the following table,…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Am. 340.
Colonel Motors (C) Separated Edison (S) Expected Return 10% 8% Standard Deviation 6% 3% Please represent graphically all potential combinations of stocks C and S, if the correlation coefficient between the returns of stocks C and S is: A) 1 B) 0 C) -1 Please report these investment opportunity sets in the corresponding Excel sheets.
Use the following information to calculate the expected return and standard deviation of a portfolio that is 60 percent invested in 3 Doors, Incorporated, and 40 percent invested in Down Company: Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Expected return, E(R) Standard deviation, o Correlation Expected return Standard deviation 3 Doors, Incorporated 16% 46 0.31 2.00% 2.00% Down Company 24% 48
The expected return and standard deviation of a portfolio that is 50 percent invested in 3 Doors, Incorporated, and 50 percent invested in Down Company. are the following: Expected return, E(R) Standard deviation, o 3 Doors, Incorporated 14% 42 Correlation +1 Correlation 0 Correlation-1 What is the standard deviation if the correlation is +1? 0? -1? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Standard Deviation 33.61 % Down Company 10% 31 %
Consider the following returns of Stock 1 and Stock 2: Stock 1 Stock 2 Realized Realized Year End Return Return 2004 20.1% -14.6% 2005 72.7% 4.3% 2006 -25.7% -58.1% 2007 56.9% 71.1% 2008 6.7% 17.3% 2009 17.9% 0.9% Suppose you have a portfolio that is made up of 70% investments in Stock 1 and 30% investments in Stock 2. Compute: 1) Average annual return of the portfolio from 2004 to 2009; 2) Variance of the portfolio; 3) Standard deviation of the portfolio.
The table given below reports last five years data on annual rates of return (HPYS) on two stocks Year Stock A (%) Stock B (%) 1 16 -10 24 40 30 10 5 -20 20 pre 3. Compute the coefficient of variation for each stock. By this measure which stock is preferable.
The table given below reports last five years data on annual rates of return (HPYS) on two stocks Year Stock A (%) Stock B (%) 1 16 -10 24 40 30 10 5 -20 20 2. Compute the standard deviation for each stock. Which stock is preferable by this measure measure
The historical returns for the past three years for Stock B and the stock market portfolio are Stock B: 24 percent, 0 percent, 24 percent; market portfolio: 10 percent, 12 percent, 20 percent. Calculate the beta for Stock B. 1 1.17 1.13 0.86
The table below provides five years of realized returns for both Stock XYZ and the market portfolio. Use this information to estimate Stock XYZ's beta with the market. Year Year Year Year Year 1 2 3 4 Stock 2% 17% 27% 23% -9% XYZ Return Market -6% 17% -7% 13% -3% Return 0.4413 0.4797 0.5181 O 0.5565 O 0.5949
Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown below, with a correlation of 22.2%. Johnson & Johnson Walgreen Company E [R] 7.2% 9.3% SD [R] 16.8% 20.4% For a portfolio that is equally invested in Johnson & Johnson's and Walgreen's stock, calculate: a. The expected return. b. The volatility (standard deviation). a. The expected return. The expected return of the portfolio is ☐ %. (Round to one decimal place.) b. The volatility (standard deviation). The volatility of the portfolio is %. (Round to one decimal place.)
Consider the annual returns produced by two different active equity portfolio managers (A and B) as well as those to the stock index with which they are both compared: Period Manager A Manager B Index 1 12.7 % 13.5 % 11.6 % 2 -1.6 -4.5 -2.3 3 14.9 13.2 18.9 4 0.5 2.2 -0.6 5 -7.6 -6.7 -3.5 6 24.8 24.3 21.6 7 -10.7 -12.2 -13.2 8 5.2 5.5 5.1 9 2.6 4.3 2.6 10 19.1 18.3 19.3 Did either manager outperform the index, based on the average annual return differential that he or she produced relative to the benchmark? Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to two decimal places. Manager A: % Manager B: % 's average return is less than the index and 's average exceeded that of the index. Calculate the tracking error for each manager relative to the index. Which manager did a better job of limiting his or her client's unsystematic…
Problems BETA COEFFICIENTS AND RATES OF RETURN You are given the following set of data: 8A-1 Historical Rates of Return (r) Stock Y(F,) NYSE (F.) Year 1 3.0% 4.0% 18.2 14.3 9.1 19.0 (6.0) (14.7) (15.3) (26.5) 33.1 37.2 7 6.1 23.8 3.2 (7.2) 9. 14.8 6.6 10 24.1 20.5 11 18.0 30.6 Mean 9.8% 9.8% 13.8 19.6 d. Suppose the regression line had been downward sloping and the beta coefficient had been negative. What would this imply about (1) Stock Y's relative riskiness and (2) its probable risk premium? e. Construct an illustrative probability distribution graph of returns (see Figure 8.3) for portfolios consisting of (1) only Stock Y, (2) 1% each of 100 stocks with beta coefficients similar to that of Stock Y, and (3) all stocks (i.e., the distribution of returns on the market). Use as the expected rate of return the arithmetic mean as given previously for both Stock Y and the market, and assume that the distributions are normal. Are the expected returns "reasonable"; that is, is it reasonable…

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