D3) Finance13. Here are the expected returns on two stocks:ReturnsProbabilityXY0.1-20%10%0.820150.14020If you form a 50-50 portfolio of the two stocks, what is the portfolio's standard deviation?a. 8.1%b. 10.5%c. 13.4%d. 16.5%e. 20.0%

Here, ProbRetuns of XReturns of Y0.1-20%10%0.820%15%0.140%20%

13. Here are the expected returns on two stocks: Returns Probability 0.1 X Y -20% 10% 0.8 20 15 40 20 0.1 If you form a 50-50 portfolio of the two stocks, what is the portfolio's standard deviation? a. 8.1% b. 10.5%

13. Here are the expected returns on two stocks: Returns Probability 0.1 X Y -20% 10% 0.8 20 15 40 20 0.1 If you form a 50-50 portfolio of the two stocks, what is the portfolio's standard deviation? a. 8.1% b. 10.5%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 4P: An analyst has modeled the stock of a company using the Fama-French three-factor model. The market...

See similar textbooks

Related questions

Q: Q1. You have been told that you need $x today in order to have $100,000 when you retire 20 years…

A: Q4. To find the present value of an annuity (the financial instrument that will pay $5,000 a year…

Q: Project L requires an initial outlay at t=0 of $60,000, its expected cash inflows are $11,000 per…

A: Step 1: The calculation of MIRR AB1YearCashflows20 $ (60,000.00)31 $ 11,000.00 42 $ 11,000.00 53…

Q: What is the weighted-average cost of capital for SKYE Corporation given the following information?…

A: Cost of Equity using the Capital Asset Pricing Model (CAPM):The CAPM formula is:Cost of…

Q: You are currently in an equity swap receiving the QQQ return and paying 4% fixed on a nominal value…

A: (a) Zero-Coupon Bond Prices:1. Calculate the zero-coupon bond prices using the formula:…

Q: Suppose Capital One is advertising a 60 month, 5.58% APR motorcycle loan. If you need to borrow…

A: Step 1: Given Value Calculation Compound = Monthly = 12Number of Payment = n = 60Monthly rate of…

Q: None

A: Given DataStocks beta = 0.76Stocks currently selling at = $16Options held = 1,000,000Option delta =…

Q: 1. The owners' equity accounts for Investo Unlimited are shown here: Common stock ($.75 par value)…

A: To solve this problem, we need to understand the concept of a stock dividend and how it affects the…

Q: You have looked at the current financial statements for J&R Homes, Company. The company has an…

A: STEPSThe free cash flow to equity (FCFE) method, which determines the value of the equity by…

Q: Consider the following information: State of Economy Boom Probability of State of Economy Security…

A: Let's dissect the process of determining the portfolio's percentage standard deviation into more…

Q: Will you accept or reject the project? OAccept ○ Reject At what level of pretax cost savings would…

A: The level of pre-tax cost savings at which you would be indifferent between accepting the project…

Q: Emma holds a $7,500 portfolio that consists of four stocks. Her investment in each stock, as well as…

A: The objective of the question is to determine the stock that contributes the least market risk and…

Q: None

A: First Question The cost of preferred stock, Rp, used in the weighted average cost of capital…

Q: None

A: Step 1: Net present value (NPV) is the one of the best and considered as superior method to evaluate…

Q: Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax…

A: To better understand the computations, let's go over each step in greater detail: First, figure out…

Q: Required: Use the financial statements of Heifer Sports Incorporated to find the information below…

A: Heifer Sports Incorporated Financial Analysis (2023)a. Inventory Turnover Ratio:Inventory Turnover…

Q: The owner of a pizza restaurant needs to buy a new pizza oven for the restaurant. The oven costs…

A: 1. Depreciation Expense:The oven has a cost of $450 and a useful life of 5 years.We're using the…

Q: None

A: Step 1:a.Short-term investment fund (A) mean = 2.00% Standard deviation = 0.30% Intermediate-term…

Q: The Dauten Toy Corporation currently uses an injection molding machine that was purchased prior to…

A: To calculate the NPV of the incremental cash flow stream, we need to determine the incremental cash…

Q: Required information Skip to question [The following information applies to the questions displayed…

A: "11 VEL SAL" doesn't seem to correspond to any recognizable phrase in English. It might be a code or…

Q: On Friday, March 4, Kufours announced it would pay a dividend of $.63 per share on Friday, April 1.…

A: The date of record for Kufours' dividend was likely Tuesday, March 22, 2023.Here's how we can…

Q: Raghubhai

A: Step 1: sales revenue in 2 years 440 x 1500 = $660,000variable cost245 x 1500 = 367,500 Step 2:…

Q: What is the current CD (certificate of deposit rate) from your financial institution (bank) for a CD…

A: These rates are subject to change based on market conditions and the policies of our institution.…

Q: Suppose that Gyp Sum Industries currently has the balance sheet shown. below, and that sales for the…

A: Step 1:A balance sheet is a type of financial statement that shows a company's assets, liabilities,…

Q: View Policies Current Attempt in Progress Nancy Jackson has $185,000 to invest. She wants to be able…

A: Nancy Jackson's financial goal involves ensuring a perpetual income stream while safeguarding her…

Q: Bhupatbhai

A: From 1900 to 2017, the average return on extensive U.S. common stocks was:- The information shows…

Q: Saved Check my work mode: This shows what is correct or incorrect for the work you have completed so…

A: To calculate the yield to maturity , I use the excel function=RATE(NPER,PMT,-PV,FV) Given dataFace…

Q: You observe that the inflation rate in the USA is 2 percent per year and that T-bills curently yeild…

A: 1. Calculating Inflation Rate for AustraliaGiven:- U.S. inflation rate (i_e) = 2.0%- U.S. nominal…

Q: fix and give correct answers please. i will upvote!

A: b)Dividend payout = $1,500,000*50% = $750,000Dividend he received=( $750,000/780,000)*1300 =…

Q: BBP, Inc., with sales of $400,000, has the following balance sheet: BBP, Incorporated Balance…

A: Now, if the firm distributed all of its earnings, the retained earnings would be zero, and we need…

Q: You are a market-maker working at a large broker-dealer in the FX spot market. You are responsible…

A: In the foreign exchange (FX) spot market, market-makers play a crucial role by providing liquidity…

Q: What are the four main stages of bank regulation and supervision, and how does each stage differ…

A: The objective of this question is to understand the four main stages of bank regulation and…

Q: You just graduated and started your new job. Your starting salary is $80,000/year. Your employer's…

A: d)Time period (n) =40 yearsRate of interest (I) =8% p.aAnnual Contribution = $8000Total amount at…

Q: Raghubhai

A: The objective of the question is to calculate the actual percentage capital change on each bond and…

Q: Nikul

A: Step 1: The calculation of the expected return ABCD1Economic statesProbabilityReturnProb.…

Q: None

A: The objective of the question is to formulate a linear programming problem to determine which…

Q: Consider the following information: State Probability i of State i Actual Return of Johnson and…

A: Step 1: Expected Return (Mean)Expected Return = (Probability of Boom * Return in Boom) +…

Q: You plan to purchase a $200,000 house using either a 30-year mortgage obtained from your local…

A: Let us dissect the computations and provide a more comprehensive explanation. a. Principal and…

Q: Consider the following information on two stocks: P(State) Stock A Stock B Boom 20% 30% 20% Normal…

A: Step 1: Let's answer it by using Excel: Step 2: Working notes: Step 3:Therefore, the answer…

Q: Lakoniskok equipment has an investment opportunity

A: Investment refers to the allocation of resources, typically money or capital, with the expectation…

Q: Based on the following information, what is the expected return? State of Economy Recession Normal…

Q: Vijay

Q: Corporate Finance In Reddit’s IPO, shares were issued at $34, and increased 48% that day, closing at…

A: The objective of the question is to understand whether the founders of Reddit would be upset at the…

Q: There are two investment funds managed by the ABC investment company with the following…

A: Here, Expected ReturnStandard DeviationStock Fund20.00%30.00%Bond Fund8.00%10.00%Risk Free…

Q: Problem 19-15 Dividend Policy Mahomes Company has a current period cash flow of $1.5 million and…

A: Let's dissect the computations and offer a more thorough justification. a. Share price: The present…

Q: Bhupatbhai

A: To estimate the monthly sales for 2021 for John's Bait and Fish Shop, apply a linear regression…

Q: None

A: Calculations:Depreciation:We need to find the depreciation for each year using the 7-year MACRS…

Q: Your investment portfolio has 9,000 shares of Ball Hawks, which has an expected return of 9.60…

A: Investment in Ball Hawks is = (No of shares * Price)Investment in Ball Hawks is =…

Q: A stock has an expected return of 10%, its beta is 0.9, and the risk-free rate is 5%. Calculate the…

Q: Required: Zeda Incorporated, a U.S. MNC, is considering making a fixed direct investment in Denmark.…

A: let's calculate the present value of each repayment using the appropriate discount rate:Convert the…

Q: Project L requires an initial outlay at t=0 of $35,000, its expected cash inflows are $14,000 per…

A: NPV = sum_{t=1}^{n} C_t/(1 + r)^t - C_0where:- ( C_t) is the cash inflow at time t,- ( n) is the…

Question

D3)

Finance
13. Here are the expected returns on two stocks:
Returns
Probability
X
Y
0.1
-20%
10%
0.8
20
15
0.1
40
20
If you form a 50-50 portfolio of the two stocks, what is the portfolio's standard deviation?
a. 8.1%
b. 10.5%
c. 13.4%
d. 16.5%
e. 20.0%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Given:

VIEW

Step 2: Calculate the standard deviation of portfolio:

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?
You have observed the following returns over time: Assume that the risk-free rate is 6% and the market risk premium is 5%. What are the betas of Stocks X and Y? What are the required rates of return on Stocks X and Y? What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y?
Which one of the following stocks is correctly priced if the risk-free rate of return is 3.0 percent and the market risk premium is 7.5 percent? Expected Return 8.46% Stock A B с D E 0000С Stock A O Stock D Stock C O Stock E Beta 77 1.46 1.27 1.44 .95 Stock B 12.47 11.19 13.80 8.65
For an investment in a stock, the probability of the return being -10.0% is 0.3, 10.0% is 0.4, and 30.0% is 0.3. Given the probability distributions, what is the expected rate of return for the investment?Choices:A. 10.00%B. 9.50%C. 15.00%D. 12.50%E. 13.00%
4. Consider the following equation of the CAPM: E(R) = 5%+B₁*10% P is an equally-weighted portfolio composed of the risk-free rate and stocks A, B and C. The following characteristics are given with respect to the three stocks: Stock Po E(P) E(D) В A 100 112 5 1.1 B 5 5.5 1 0.7 с 10 8 4 1.3 Compute the expected alpha of this portfolio.
Consider three scenarios with the probabilities given below. Let the returns on two different stocks in these scenarios be as follows: Scenario Probability return K1 return K2 Wi 0.2 -10% -30% W2 0.5 0% 20% W3 0.3 10% 50% If a portfolio has 60% of funds invested in stock 1 and 40% of funds invested in stock 2, find the risk oy for this portfolio.
2. a. You expect an RFR of 10 percent and the market return (RM) of 14 percent. Compute the expected return for the following stocks, and plot them on an SML graph. E(R₂) Stock DZA U N Beta 0.85 1.25 -0.20
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
Finance The risk-free rate is 3.7 percent and the expected return on the market is 12.3 percent. Stock A has a beta of 1.1and an expected return of 13.1 percent. Stock B has a beta of .86 and an expected return of 11.4 percent. Arethese stocks correctly priced? Why or why not? Use E(Ri) = Rf + βi(E(RM) − Rf).
Based on the table below, what is the expected return of the stock? Probability 0.20 0.10 0.40 0.20 0.10 O 12.8% O 12.6% O 12.4% O 13.0% Return 8% 10% 12% 15% 20% 1
11.2. Below are the expected returns from both stocks based on the probability of economic conditions. It is desired to create a portfolio from two stocks. It is decided to invest 30% in stock A and 70% in stock B. Stock A State (i) p(i) E(R) Recession 0.50 -40% Neutral 0.40 15% Воom 0.10 30% 1.00 Stock B State (i) p(i) E(R) Recession 0.5 40% Neutral 0.40 15% Вoom 0.1 -20% 1.00 e- If you were a portfolio manager, what type of investors do you recommend this portfolio and why? f- Explain why the beta of the market is always equal to 1 and beta of a treasury bill equal to 0.
Consider the following information about three stocks: Rate of Return If State Occurs Probability of State of Economy .25 State of Economy Stock A Stock B Stock C Вoom .13 .29 .60 Normal .60 .08 .11 .13 Bust .15 .02 -18 -45 a-1.lf your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a- What is the variance? (Do not round intermediate calculations and round 2. your answer to 5 decimal places, e.g., .16161.) a- What is the standard deviation? (Do not round intermediate calculations and enter 3. your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the expected T-bill rate is 3.70 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate…