PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 7, Problem 18PS
Portfolio risk Table 7.8 shows standard deviations and correlation coefficients for seven
stocks from different countries. Calculate the variance of a portfolio with equal investments
in each stock.
TABLE 7.8 Standard deviations of returns and correlation coefficients for a sample of seven stocks
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Students have asked these similar questions
Question 1
Refer to the following observations for stock A and the market portfolio in the table:Month Stock A Market portfolio1 0.30 0.122 0.24 0.083 -0.04 -0.104 0.10 -0.025 0.06 0.086 0.10 0.07
a) Calculate the main statistic measures to explain the relationship between stock A and the market portfolio:• The sample covariance between rate of return for the stock A and the market;• The sample Beta factor of stock A;• The sample correlation coefficient between the rates of return of the stock A and the market
QUESTION 1
Under which of the following scenarios, the minimum variance portfolio that contains two stocks has the smallest standard deviation?
OA. The correlation between the two stock returns is -1
OB. The correlation between the two stock returns is -0.2
OC. The correlation between the two stock returns is 0.2
OD. The correlation between the two stock returns is 0.5
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
Chapter 7 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 7 - Rate of return The level of the Syldavia market...Ch. 7 - Real versus nominal returns The Costaguana stock...Ch. 7 - Arithmetic average and compound returns Integrated...Ch. 7 - Risk premiums Here are inflation rates and U.S....Ch. 7 - Risk Premium Suppose that in year 2030, investors...Ch. 7 - Stocks vs. bonds Each of the following statements...Ch. 7 - Expected return and standard deviation A game of...Ch. 7 - Standard deviation of returns The following table...Ch. 7 - Average returns and standard deviation During the...Ch. 7 - Prob. 10PS
Ch. 7 - Prob. 11PSCh. 7 - Diversification Here are the percentage returns on...Ch. 7 - Risk and diversification In which of the following...Ch. 7 - Prob. 14PSCh. 7 - Portfolio risk To calculate the variance of a...Ch. 7 - Portfolio risk a) How many variance terms and how...Ch. 7 - Portfolio risk Table 7.8 shows standard deviations...Ch. 7 - Portfolio risk Hyacinth Macaw invests 60% of her...Ch. 7 - Stock betas What is the beta of each of the stocks...Ch. 7 - Stock betas There are few, if any, real companies...Ch. 7 - Portfolio betas A portfolio contains equal...Ch. 7 - Portfolio betas Suppose the standard deviation of...Ch. 7 - Portfolio risk Here are some historical data on...Ch. 7 - Portfolio risk Suppose that Treasury bills offer a...
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