Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 5, Problem 9CP
Use the following scenario analysis for stocks X and Y to answer CFA Questions 7 through 9.
Bear Market Normal Market Bull Market Probability 0.2 0 3 Stock X –20% 18% 50% Stock Y –15% 20% 10%
9. Assume that of your $l0,000 portfolio, you invest $9000 in stock X and $1,000 in stock Y. What is the expected return on your portfolio? (LO 5-3)
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Consider the following simplified APT model:
Factor
Expected Risk Premium
Market
6.4%
Interest Rate
-0.6%
Yield Spread
5.1%
Factor Risk Exposures
Market
Interest Rate
Yield Spread
Stock
Stock(b1)
(b2)
(b3)
P
1.0
-2.0
-0.2
P2
1.2
0
0.3
P3
0.3
0.5
1.0
Required:
1. Calculate the expected return for the above stocks. Assume risk free rate is 5%. Consider a portfolio with equal investments in stocks P, P2 and P3
2.What are the factor risk exposures for the portfolio?
3.What is the portfolio’s expected return?
Consider the following simplified APT model: Factor Expected Risk Premium
Market 6.4%
Interest Rate -0.6%
Yield Spread 5.1% Factor Risk Exposures
Market Interest Rate Yield Spread Stock Stock (b1) (b2) (b3)
P 1.0 -2.0 -0.2
P2 1.2 0 0.3
P3 0.3 0.5 1.0 a) Calculate the expected return for the above stocks. Assume risk free rate is 5%. Consider a portfolio with equal…
3. I will have info on 2 portfolios and the market benchmark, and you will calculate the CAPM = Rf
+ B(Rm – Rf) , Sharpe Ratio, Alpha=Rp - CAPM
Stock
Stock
Stock
Description
Portfolio Z Portfolio X Benchmarket
Average Retun
15.00%
18.00%
9.00%
Risk-Free Return
1.50%
1.50%
1.50%
Standard Deviation
22.00%
33.00%
16.00%
Beta
1.250
1.400
1.000
Output
Risk Premium Retun
Market Premium
Capital Asset Pricing Model
Sharpe Ratio
Jensen's Alpha
Chapter 5 Solutions
Essentials Of Investments
Ch. 5 - Prob. 1PSCh. 5 - The real interest rate approximately equals the...Ch. 5 - When estimating a Sharpe ratio, would it make...Ch. 5 - You’ve just decided upon your capital allocation...Ch. 5 - Prob. 5PSCh. 5 - The stock of Business Adventures sells for $40 a...Ch. 5 - Prob. 7PSCh. 5 - a. Suppose you forecast that the standard...Ch. 5 - Using the historical risk premiums as your guide,...Ch. 5 - What has been the historical average real rate of...
Ch. 5 - Consider a risky portfolio. The end-of-year cash...Ch. 5 - For Problems 12-16, assume that you manage a risky...Ch. 5 - For Problems 12-16, assume that you manage a risky...Ch. 5 - For Problems 12-16, assume that you manage a risky...Ch. 5 - For Problems 12-16, assume that you manage a risky...Ch. 5 - For Problems 12-16, assume that you manage a risky...Ch. 5 - Prob. 17PSCh. 5 - You manage an equity fund with an expected risk...Ch. 5 - What is the reward-to--volatility (Sharpe) ratio...Ch. 5 - A portfolio of nondividend-paying stocks earned a...Ch. 5 - Which of the following statements about the...Ch. 5 - Which of the following statements reflects the...Ch. 5 - Use the following data in answering CFA Questions...Ch. 5 - Prob. 5CPCh. 5 - Lise the following data in answerifng CFA Question...Ch. 5 - Use the following scenario analysis for stocks X...Ch. 5 - Prob. 8CPCh. 5 - Use the following scenario analysis for stocks X...Ch. 5 - 10. Probabilities for three states of the economy...Ch. 5 - 11. An analyst estimates that a stock has the...Ch. 5 - Prob. 1WMCh. 5 - Prob. 2WMCh. 5 - Prob. 3WM
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