18. What is the standard deviation of the returns on a portfolio that is invested in stocks A, B, and C? 20 percent of the portfolio is invested in stock A and 45 percent is invested in stock C. State of Economy Probability of Returns if State Occurs Stock C 11% 8% -13% State of Economy Stock A Stock B Вoom 20% 9% Normal Bust 55% 25% 4% -2% 3% 5% 10%
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Q: 18. What is the standard deviation of the returns on a portfolio that is invested in stocks A, B,…
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- 18. What is the standard deviation of the returns on a portfolio that is invested in stocks A, B, andC? 40 percent of the portfolio is invested in stock A and 35 percent is invested in stock C.State of Economy Probability ofState of EconomyReturns if State OccursStock A Stock B Stock CBoom 15% 13% 5% 17%Normal 65% 6% 8% 11%Bust 20% -2% 14% -19%19. Your portfolio has a beta of 0.80. The portfolio consists of 30 percent Treasury bills, 50percent stock A, and 20 percent stock B. Stock A has a risk-level equivalent to that of theoverall market. What is the beta of stock B?20. CEPS Group stock has a beta of 1.15. The risk-free rate of return is 4.75 percent and themarket risk premium is 7.5 percent. What is the expected rate of return on this stock?18. What is the standard deviation of the returns on a portfolio that is invested in stocks A, B, C? 25 percent of the portfolio is invested in stock A and 45 percent is invested in stock C. and State of Economy Probability of Returns if State Occurs State of Economy | Stock A Stock B Stock C Boom 5% 21% 8% 28% Normal 70% 10% 13% 19% Bust 25% -3% 24% -31%6. Stock A and B have expected return and standard deviation respectively as follow Stock Expected return Standard deviation A 11% 13% B 23% 18% Correlation between A and B= 0.45 Risk-free rate = 4% %3D a) Which portfolio should be invested if investor is considering between Risky portfolio 1 (30% in stock A and 70% in stock B) and portfolio 2 (25% in stock A and 75% in stock B) b) If Investor add a risk-free asset C with a return of 5% into the risky portfolio that was choosed in part (a) to form a complete portfolio. What should the optimal proportions of risky portfolio and risk-free asset for an investor whose degree of risk aversion is 3. c) Calculate the expected return and standard deviation of the complete portfolio
- Which of the following statement(s) is(are) true? 1) The real rate of interest is determined by the supply and demand for funds. II) The real rate of interest is determined by the expected rate of inflation. III) The real rate of interest is unaffected by actions of the Fed. IV) The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation. III and IV only. I only. OII and III only. O, II, III, and IV only. OI and III only.You decide to invest in a portfolio consisting of 15 percent Stock X, 51 percent Stock Y, and the remainder in Stock Z. Based on the following information, what is the standard deviation of your portfolio? State of Economy Probability of State Return if State Occurs of Economy Stock X Stock Y Stock Z Normal .77 10.50% 3.90% 12.90% Boom .23 17.80% 25.80% 17.30% Multiple Choice 5.79% 2.51% 3.35% 8.44% 7.24%distributiothe following progability for stocks A and DE 20201 State Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 0.20 13% 7% 0.20 12% 6% 0.30 14% 9% 5 0.20 15% 8% Ghi The expected rates of AKL return of stocks A and B are respectively. A 14%; 10% MALA B 13.2%; 9% C 7.7%; 13.2% MA D 13.2%; 7.7% 12345 2 3 4 and MALAKLA MALA MA
- 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 stock return scenarios for three stocks: Stock Stock A B Economy Up Average Down 8% 5% 0% 2% 3% 4% Stock с 12% 0% -5% If each state of the economy is equally likely, calculate the expected return and population standard deviation for a portfolio invested entirely in Stock A. Which stock should be added to the portfolio to reduce risk?Accounting Use the following information: Stock A B Good state 12% 17% Bad state 0% -1% Assume there is 60% probability that the good state occurs and 40% chance the bad state occurs. What is the expected return of a portfolio that is 9% invested in stock A and 1-9% invested in B? (Please use 5 decimal places, this should be written in percentage return, so an answer of 23.143% should be written at .23143)
- Bear Market Normal Market Bull Market Probability 0.2 0.5 0.3 Stock X -20% 18% 50% Stock Y -15% 20% 10% Using the above information for stock X and Y, calculate (i) expected rate of return for X and Y and (ii) calculate the standard deviations of returns on stocks X and Y.What is the expected return of a portfolio consisting of $6,000 stocks G and $4,000 stock H ? State of Probability of Returns if State Occurs Economy State of Economy Stock G (" Stock H ")/(11%) Boom 22% 14% 1% Normal 78% 7% 9% a. 7.2% b. 7.6% c. $7.9% d. 8.3% e. $8.9% 33. Joel Foster is the portfolio manager of the SF Fund, a $1 million hedge fund that contains the following stocks. The required rate of return on the market is 10% and the risk-free rate is 4%. What rate of return should investors expect (and require) on this fund? Stoo Amount bar(A) 270,000 B 330,000 1.4 bar(C) 400,000 0.7 $1,000,000 a. 8.756% b. 9.382% c. 9.921%2. A portfolio consists of two stocks: Stock Expected Return Standard Deviation Weight Stock 1 10% 15% 0.30 Stock 2 13% 20% ??? The correlation between the two stocks' return is 0.50 (a)Calculate the expected return and standard deviation of the portfolio. Expected Return: Standard Deviation: