Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 11, Problem 11P
a)
Summary Introduction
To determine: The volatility of portfolio when the portfolio of AP Company’s stock is 100% and WP Company’ stock is 0%.
Introduction:
The portfolio refers to a set of financial investments owned by the investor. The portfolio of investments includes the debentures, stocks, bonds, and mutual funds.
b)
Summary Introduction
To determine: The volatility of portfolio when the portfolio of AP Company’s stock is 75% and WP Company’s stock is 25%.
c)
Summary Introduction
To determine: The volatility of portfolio when the portfolio of AP Company’s stock is 50% and WP Company’s stock is 50%.
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Suppose Wesley Publishing's stock has a volatility of 70%, while Addison Printing's stock has a volatility of 30%. If the correlation between these stocks is 50%, what is the volatility of the following portfolios of Addison and Wesley:
a. 100% Addison
b. 75% Addison and 25% Wesley
c. 50% Addison and 50% Wesley
Suppose Wesley Publishing's stock has a volatility of 60%, while Addison Printing's stock has a volatility of 20%. If the correlation between these stocks is 20%, what is the volatility of the following portfolios of Addison and Wesley: a. 100% Addison b. 75% Addison and 25% Wesley c. 50% Addison and 50% Wesley
Suppose Wesley Publishing's stock has a volatility of 70%, while Addison Printing's stock has a volatility of 20%. If the correlation between these stocks is 25%, what is the volatility of the following portfolios of Addison and Wesley:
a. 100% Addison
b. 75% Addison and 25% Wesley
c. 50% Addison and 50% Wesley
a. The volatility of a portfolio of 100% Addison stock is
%. (Round to two decimal places.)
b. The volatility of a portfolio of 75% Addison and 25% Wesley is
%. (Round to two decimal places.)
c. The volatility of a portfolio of 50% Addison and 50% Wesley is
%. (Round to two decimal places.)
Chapter 11 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 11.1 - What is a portfolio weight?Ch. 11.1 - How do we calculate the return on a portfolio?Ch. 11.2 - What does the correlation measure?Ch. 11.2 - How does the correlation between the stocks in a...Ch. 11.3 - Prob. 1CCCh. 11.3 - Prob. 2CCCh. 11.4 - Prob. 1CCCh. 11.4 - Prob. 2CCCh. 11.4 - Prob. 3CCCh. 11.5 - What do we know about the Sharpe ratio of the...
Ch. 11.5 - If investors are holding optimal portfolios, how...Ch. 11.6 - When will a new investment improve the Sharpe...Ch. 11.6 - Prob. 2CCCh. 11.7 - Prob. 1CCCh. 11.7 - Prob. 2CCCh. 11.8 - Prob. 1CCCh. 11.8 - According to the CAPM, how can we determine a...Ch. 11 - You are considering how to invest part of your...Ch. 11 - You own three stocks: 600 shares of Apple...Ch. 11 - Consider a world that only consists of the three...Ch. 11 - There are two ways to calculate the expected...Ch. 11 - Using the data in the following table, estimate...Ch. 11 - Use the data in Problem 5, consider a portfolio...Ch. 11 - Using your estimates from Problem 5, calculate the...Ch. 11 - Prob. 8PCh. 11 - Suppose two stocks have a correlation of 1. If the...Ch. 11 - Arbor Systems and Gencore stocks both have a...Ch. 11 - Prob. 11PCh. 11 - Suppose Avon and Nova stocks have volatilities of...Ch. 11 - Prob. 13PCh. 11 - Prob. 14PCh. 11 - Prob. 16PCh. 11 - What is the volatility (standard deviation) of an...Ch. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Suppose Ford Motor stock has an expected return of...Ch. 11 - Prob. 22PCh. 11 - Prob. 23PCh. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26PCh. 11 - A hedge fund has created a portfolio using just...Ch. 11 - Consider the portfolio in Problem 27. Suppose the...Ch. 11 - Prob. 29PCh. 11 - Prob. 30PCh. 11 - You have 10,000 to invest. You decide to invest...Ch. 11 - Prob. 32PCh. 11 - Prob. 33PCh. 11 - Prob. 34PCh. 11 - Prob. 35PCh. 11 - Prob. 36PCh. 11 - Assume all investors want to hold a portfolio...Ch. 11 - In addition to risk-free securities, you are...Ch. 11 - You have noticed a market investment opportunity...Ch. 11 - Prob. 40PCh. 11 - When the CAPM correctly prices risk, the market...Ch. 11 - Prob. 45PCh. 11 - Your investment portfolio consists of 15,000...Ch. 11 - Suppose you group all the stocks in the world into...Ch. 11 - Prob. 48PCh. 11 - Consider a portfolio consisting of the following...Ch. 11 - Prob. 50PCh. 11 - What is the risk premium of a zero-beta stock?...
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- Arbor Systems and Gencore stocks both have a volatility of 37%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is (a) + 1.00, (b) 0.50, (c) 0.00, (d) – 0.50, and (e) - 1.00. In which of the cases is the volatility lower than that of the original stocks? If the correlation is + 1.00, the volatility of the portfolio is %. (Round to one decimal place.) If the correlation is 0.50, the volatility of the portfolio is %. (Round to one decimal place.) If the correlation is 0.00, the volatility of the portfolio is %. (Round to one decimal place.) If the correlation is - 0.50, the volatility of the portfolio is %. (Round to one decimal place.) If the correlation is - 1.00, the volatility of the portfolio is %. (Round to one decimal place.) In which of the cases is the volatility lower than that of the original stocks? (Select the best choice below.) A. In all of the cases. B. In cases (b), (c), (d) and (e). C. In none of the cases. O…arrow_forwardArbor Systems and Gencore stocks both have a volatility of 44%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is (a) +1.00, (b) 0.50, (c) 0.00, (d) - 0.50, and (e) - 1.00. In which of the cases is the volatility lower than that of the original stocks? If the correlation is +1.00, the volatility of the portfolio is%. (Round to two decimal place.)arrow_forwardArbor Systems and Gencore stocks both have a volatility of 41%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is 0. The volatility of the portfolio is _______%.arrow_forward
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