Using the data in the following table,, and the fact that the correlation of A and B is 0.81, calculate the volatility (standard deviation) of a portfolio that is 65% invested in stock A and 35% invested instock B.The return of stock A is 4.33 %. (Round to two decimal places.)The return of stock B is 12.50 %. (Round to two decimal places.)The variance of stock A is 0.00632. (Round to five decimal places.)The variance of stock B is 0.02743. (Round to five decimal places.)The standard deviation of stock A is 8.71%. (Round to two decimal places.)The standard deviation of stock B is 18.14%. (Round to two decimal places.)The variance of the portfolio of 65% stock A and 35% stock B is 0.02388. (Round to fThe standard deviation of the portfolio of 65% stock A and 35% stock B is%. (RourData table(Click on the following icon in order to copy its contents into a spreadsheet.)Realized ReturnsYear201720182019202020212022Stock A- 2%16%8%- 8%2%10%PrintDoneStock B13%38%13%- 5%- 10%26%-X

Sure, the volatility (standard deviation) of a portfolio that is 65% invested in stock A and 35%…

Answered: Using the data in the following table,,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Suppose the index model for stocks A and B is estimated with the following results: rA = 2% + 0.8RM + eA, rB = 2% + 1.2RM + eB, σM = 20%, and RM = rM − rf . The regression R2 of stocks A and B is 0.40 and 0.30, respectively. Answer the following questions. Total: (a) What is the variance of each stock? (b) What is the firm-specific risk of each stock? (c) What is the covariance between the two stocks?
Suppose the index model for stocks A and B is estimated with the following results:rA = 2% + 0.8RM + eA, rB = 2% + 1.2RM + eB , σM = 20%, and RM = rM − rf . The regressionR2 of stocks A and B is 0.40 and 0.30, respectively. Answer the following questions. (a) What is the variance of each stock? (b) What is the firm-specific risk of each stock? (c) What is the covariance between the two stocks?
3. Consider two stocks A and B with expected returns of 6% (stock A) and 8% (stock B). The matrix of variances and covariances is presented below: Stock A В A 0.0064 -0.008 B -0.008 0.01 a. Write the variance of the portfolio composed of A and B as a function of the proportion x invested in stock A. (1-x) is invested in B. Short sales are not allowed on the market. b. Write the variance of the portfolio composed of A and B as a function of the portfolio's expected return. c. What are the proportions invested in the minimum risk portfolio composed of A and B? d. Draw the graph of the portfolios combining A and B in a (V, E) space. V=variance, E=expected return. e. If the standard deviation of the pf is 7% what proportions were invested in A and B?
. Find Portfolio Variance: Assume stock A, stock B, stock C are real estate stocks in a portfolio having weights in the portfolio of 20%, 35% & 45% respectively. The standard deviation of the assets is 3.2%, 3.5%, and 4%. The correlation coefficient between A and B is 0.6 between A and C is 0.8 and Between B and C is 0.5.
Suppose the index model for stocks A and B is estimated with the following results:rA = 2% + 0.8RM + eA, rB = 2% + 1.2RM + eB , σM = 20%, and RM = rM − rf . The regressionR2 of stocks A and B is 0.40 and 0.30, respectively.(a) What is the variance of each stock? (b) What is the firm-specific risk of each stock? (c) What is the covariance between the two stocks?
If beta of Stock A with market is 0.72 and and the market variance is 225 , the covariance between A and B is 202.5, beta of stock B with market is a. 1.10 b. 0.81 c. 1.20 d. 1.25
Given the following returns for Stock X and stock Y Stock X % return Stock Y % return 2 1 4 3 6 5 8 6 12 9 Calculate the variance, and standard deviation of each stock return, assume the above is a sample (i.e. divide by n-1 instead of n). Interpret the results for x only. Calculate the covariance, and correlation coefficient between both stocks Assume a portfolio made of both stocks (60% in stock X and 40% in stock Y) calculate the expected return and standard deviation of the portfolio.
What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? Note: Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format. Year 1 2 3 4 Return (%) Year1: -4.1% Year2: 27.6% Year 3: 12.3% Year 4: 3.6%
A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance between Stock X and Stock Y is 0.10. The standard deviation of Stock X is 0.50, and the standard deviation of Stock Y is 0.50. Which of the following comes closest to the variance of the portfolio? Select one: a. 0.60 b. 1.00 c. 0.42 d. 0.18 e. 0.55
a. The standard deviation of returns is 0.30 for Stock A and 0.20 for Stock B. The covariance betweenthe returns of A and B is 0.006. The correlation of returns between A and B is:
Suppose Stock A has an expected return of 18% and a variance of 0.17, while Stock B has an expected return of 11% and a variance of 0.056. The covariance between Stocks A and B is -0.075. What is the expected return and standard deviation of a portfolio with 60% in A and 40% in B?
Calculate the correlation coefficient for the portfolio using the following information: Variance of Stock X 0.08 Variance of Stock Y 0.06 Covariance is 0.05 a. 0.1042 b. 0.7217 c. 0.00024 d. 0.0693

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