Your portfolio allocates equal funds to DW Co. and Woodpecker, Inc. DW Co. stock has an annual return mean and standard deviation of 15 percent and 38 percent, respectively. Woodpecker, Inc., stock has an annual return mean and standard deviation of 10.2 percent and 52 percent, respectively. The return correlation between DW Co. and Woodpecker, Inc., is zero. What is the smallest expected loss for your portfolio in the coming month with a probability of 16 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.)

Your portfolio allocates equal funds to DW Co. and Woodpecker, Inc. DW Co. stock has an annual return mean and standard deviation of 15 percent and 38 percent, respectively. Woodpecker, Inc., stock has an annual return mean and standard deviation of 10.2 percent and 52 percent, respectively. The return correlation between DW Co. and Woodpecker, Inc., is zero. What is the smallest expected loss for your portfolio in the coming month with a probability of 16 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.)

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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A portfolio is invested 24 percent in Stock G, 39 percent in Stock J, and 37 percent in Stock K. The expected returns on these stocks are 10.5 percent, 13 percent, and 18.4 percent, respectively. What is the portfolio's expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Manshukh
Stock X has a beta of 0.6, while Stock Y has a beta of 1.4. Which of the following statements is CORRECT? a. If expected inflation increases but the market risk premium is unchanged, then the required return on both stocks will fall by the same amount. b. A portfolio consisting of $50,000 invested in Stock X and $50,000 invested in Stock Y will have a required return that exceeds that of the overall market. c. If expected inflation declines but the market risk premium is unchanged, then the required return on both stocks will decrease but the decrease will be greater for Stock Y. d. Stock Y must have a higher expected return and a higher standard deviation than Stock X. e. If the market risk premium declines but expected inflation is unchanged, the required return on both stocks will decrease, but the decrease will be greater for Stock Y.
You have a portfolio consisting solely of Stock A and Stock B. The portfolio has an expected return of 10.9 percent. Stock A has an expected return of 13.4 percent while Stock B is expected to return 7.3 percent. What is the portfolio weight of Stock A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
A portfolio analyst has been asked to allocate investment funds among three different stocks. The relevant data for the stocks is shown in the following table. If the goal is to maximize return while maintaining risk within acceptable bounds (in this case, a portfolio standard deviation of no more than 20%), find the proper allocation of the funds to each stock. Return Risk (Standard Deviation Stock (R) A 20% to S) 25% Pair of Stocks Joint Risk (Covariance) A to B 0.05 B 10% 12% A to C 0.075 C 15% 10% B to C -0.05 ces What proportion of the portfolio should be allocated to stock]B?
Tyler Trucks stock has an annual return mean and standard deviation of 10.0 percent and 29 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 21.0 percent and 65 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is -.5. What is the smallest expected loss for your portfolio in the coming month with a probability of 2.5 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.) Smallest expected loss %
Suppose that all stocks in an equity market can be grouped into two mutually exclusive portfolios (that is, with each stock appearing in only one portfolio): value stocks and growth stocks. -Assume that these two portfolios are equal in size by market value and the correlation of their returns is 0.3. -Value stocks have an expected return of 14% and a standard deviation of return of 20%. -Growth stocks have an expected return of 18% and a standard deviation of return of 24%. -If the riskfree rate is 6%, calculate the Sharpe ratio of an equally-weighted portfolio of the value and growth stock portfolios. Show all calculations.
A stock has a beta of 1.2 and an expected return of 11.8 percent. A risk-free asset currently earns 3.8 percent. If a portfolio of the two assets has a beta of 2.4, what are the portfolio weights? Weight of risk-free?
What is the expected rate of return on R. Halsey Inc. stock if it has a correlation coefficient equal to 0.48 with the market portfolio and a standard deviation of 0.25? The risk free rate is 3% and the return on the market is 12%. Assume CAPM holds and the risk free and market combined portfolio has a standard deviation of 14% and an expected return of 8 %
Tyler Trucks stock has an annual return mean and standard deviation of 14 percent and 37 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 11.2 percent and 55 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is 0.5. What is the smallest expected loss for your portfolio in the coming month with a probability of 1 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.) Smallest expected loss 16.07 %
You are allocating your wealth between two shares, GoldenClaw and Syldavian Industries. GoldenClaw has volatility 40.00%, while Syldavian Insustries has volatility 23.30%. The correlation beteween the two shares' returns is -0.13. What percentage of your wealth should you allocate to GoldenClaw to minimise your portfolio's volatility?
Tyler Trucks stock has an annual return mean and standard deviation of 10 percent and 45 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 10.4 percent and 51 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is 0.5. What is the smallest expected loss for your portfolio in the coming month with a probability of 1 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.) Smallest expected loss %

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