What is the expected return of an equally weighted portfolio comprised of the following three stocks? State of Economy Probability of State of Economy Rate of Return if State Ocurs Stock B Stock A Stock C .07 .13 .22 .25 .19 .15 -.29 .13 .05 Boom Normal .72 Bust .03 -.14

2. Consider the following expected returns, volatilities, and correlations: Expected Standard Stock Return Deviation Correlation with Vital Correlation with Mital Correlation with Pital Vital 14% 6% 1.0 -1.0 0.0 Mital 44% 24% -1.0 1.0 0.7 Pital 23% 14% 0.0 0.7 1.0 a. Imagine a portfolio comprising solely of Vital and Mital. What portion of should be allocated to Vital stock to ensure a risk-free investment? your investment b. What is the portfolio's volatility when holding a $10,000 long position in Pital and a $2000 short position in Mital? wwwww c. In a market, there are two securities, Artis and Brotis. Currently, the price of Artis stands at £50. Looking ahead, the price of Artis next year will be £40 during a recession, £55 in normal economic times, and £60 in an expanding economy. The probabilities associated with recession, normal times, and expansion are 0.1, 0.8, and 0.1, respectively. Artis does not pay dividends and has a correlation of 0.8 with the market. On the other…

Read the information for 3 stocks X, Y and Z below.                                                                                  Rate of return when state occurs (For Stock X, Y, and Z) State of Economy Probability of State Stock X Stock Y Stock Z Boom 0.3 0.4 0.45 0.6 Normal 0.5 0.2 0.15 0.08 Recession 0.2 0 -0.3 -0.4 If your portfolio includes 35 percent of X, 40 percent of Y and 25 percent of Z, answerthe following questions: (a) Calculate the portfolio expected return.(b) Calculate the variance and the standard deviation of the portfolio (c) If the expected T-bill rate is 3.80 percent, calculate the expected risk premiumon the portfolio.

QUESTION 1 Consider the following information on stocks I and II: State of probability of Rate of Return if state Occurs state of Econ. Stock I Stock II 0.20 0.06 0.55 0.47 0.25 0.23 The market risk premium is 8%, and the risk free rate is 6%. Economy Recession Normal Boom a) Which stock has the most Systematic risk? b) Which one has the most unsystematic risk? c) Which stock is "riskier"? Explain. -0.25 0.11 0.68

Consider the following information: Rate of Return if State Occurs Probability of State State of Economy of Economy Stock A Stock B Stock C Boom .10 34 44 24 Good .60 .19 15 08 Poor .25 -.01 09 -.07 Bust .05 -15 -.19 -11 a. Your portfolio is invested 25 percent each in A and C, and 50 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) b-2. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected return b-1. Variance % b-2. Standard deviation %

You've estimated the following expected returns for a stock, depending on the strength of the economy: State (s) Probability Expected return Recession 0.1 -0.05 Normal 0.5 0.06 Expansion 0.4 0.11 What is the expected return for the stock? What is the standard deviation of returns for the stock?

how much of your capital (what weight) would you invest in stock A to maximize your portfolio's expected return per unit risk (maximize the Sharpe Ratio)?

Consider the following information: State of Economy Probability of State of Economy Boom Bust .72 .28 a. Expected return b. Variance of portfolio Rate of Return if State Occurs Stock A Stock B .04 .25 13.73 % .10 .19 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 27 percent each in A and B and 46 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. Stock C .30 -.10

Which of the following stocks is a better buy? What is the difference between expected return and required return for the best stock? Scenario Probability Stock A Stock B Market Risk-free rate Bust 0.25 -0.15 -0.05     Normal 0.55 0.2 0.1     Boom 0.2 0.4 0.3     Beta   1.2 0.9     Expected return       0.13 0.05

Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Boom Bust .66 .34 Stock A .09 .23 Stock B .03 Stock C .34 .29 -.14 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 21 percent each in A and B and 58 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. a. Expected return b. Variance of portfolio 14.43 %