Fill in the missing information in the following table. Assume that Portfolio AB is 40 percent invested in Stock A. Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. 2018 2019 2020 2021 2022 Year Average return Standard deviation Annual Returns on Stocks A and B Stock A Stock B 13.0 % 33.8 % -14.6 % 24.4 % 16.2 % 14.56 % % 21.0 % -33.2 % 43.2 % 17.6 % 28.8 % % % Portfolio AB % % % % % % %

Fill in the missing information in the following table. Assume that Portfolio AB is 40 percent invested in Stock A. Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. 2018 2019 2020 2021 2022 Year Average return Standard deviation Annual Returns on Stocks A and B Stock A Stock B 13.0 % 33.8 % -14.6 % 24.4 % 16.2 % 14.56 % % 21.0 % -33.2 % 43.2 % 17.6 % 28.8 % % % Portfolio AB % % % % % % %

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Compute the abnormal rates of return for the following stocks during period t (ignore differential systematic risk): Stock % % % % BFT % B F T UE Rit = return for stock i during period t Rmt = return for the aggregate market during period t Use a minus sign to enter negative values, if any. Round your answers to one decimal place. ARBE: ARF: ARTI: ARC: AREL: с Rit 11.5% 9.2 12.5 12.5 15.9 Rmt 4.7% 6.2 6.6 15.2 11.1
Based on the following information: State of Economy Probability of State of Economy Return on Stock J Return on Stock K Bear .20 -.030.024 Normal .55.128.052 Bull .25 .208.082 a. Calculate the expected return for each of the stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for each of the stocks. ( Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g , 32.16.) c. What is the covariance between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) d. What is the correlation between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.)
Fill in the missing information in the following table. Assume that Portfolio AB is 40 percent invested in Stock A. (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Year 2015 2016 2017 2018 2019 Average return Standard deviation Answer is complete but not entirely correct. Annual Returns on Stocks A and B Stock A Stock B 19.0 -32.0 42.0 18.0 30.0 15.40 56.45 11.0 33.0 -13.0 24.0 17.0 14.40 34.74 % % % % % % % % % % % % % % Portfolio AB 15.80 -6.00 20.00 20.40 24.80 15.00 24.32 % % % % % % %
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 2.0%+ 0.40RM + eA RB = -1.8% + 0.9RM + eB OM 15%; R-squareд = 0.30; R-square= 0.22 = What is the standard deviation of each stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock A Stock B Standard Deviation % %
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 38+0.7RM + eA + eB RB-28+1.2RM OM 20%; R-squareд 0.20; R-squareg = 0.12 What is the standard deviation of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock A Stock B = Standard Deviation % %
Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .092, E(RB) = 152, đA = .362, and Og = .622. %3D Calculate the expected return of a portfolio that is composed of 37 percent A and 63 percent B when the correlation between the returns on A and B is .52. (Do not a-1. round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Calculate the standard deviation of a portfolio that is composed of 37 percent A and 63 percent B when the correlation coefficient between the returns on A and B is .52. а-2. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Calculate the standard deviation of a portfolio with the same portfolio weights as in h part (a) when the correlation coefficient between the returns on A and B is -.52. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a-1.…
To achieve a zero standard deviation for a portfolio, calculate the weights of stock A and stock B, assuming the correlation coefficient is-1. Use the following information. (Round intermediate calculations and final answers to 2 decimal places, e.g. 31.21%) State of the economy High growth Moderate growth Recession Weight of stock A Weight of stock B Probability of occurrence 30% 25% 45% Expected return on stock A in this state 38.5% 17.5% -5.5% % % Expected return on stock B in this state 55.5% 25.5% -15.5%
S Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.6% + 1.20RM + eA RB = -1.6% + 1.5RM + eB OM = 16%; R-squareд = 0.25; R-squareg = 0.15 What is the standard deviation of each stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock A Stock B Standard Deviation % %
Attempt in Progress To achieve a zero standard deviation for a portfolio, calculate the weights of stock A and stock B, assuming the correlation coefficient is-1. Use the following information. (Round intermediate calculations and final answers to 2 decimal places, e.g. 31.21%.) State of the economy occurrence Expected return on Probability of Expected return on stock A in this state stock B in this state High growth 30% 42.5% 57.5% Moderate growth 25% 22.5% 27.5% Recession 45% -12.5% -22.5% Weight of stock A % Weight of stock B % Attempts: 0 of 3 used Submit Answer C
Consider the following information about Stocks I and II: Rate of Return if State Occurs Probability of State of State of Economy Recession Economy Stock I Stock Il .25 .06 -.30 Normal .45 .18 .06 Irrational exuberance .30 .12 .45 The market risk premium is 8 percent, and the risk-free rate is 6 percent. (Do not round intermediate calculations. Enter your standard deviation answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 2 decimal places, e.g., 32.16.) The standard deviation on Stock I's return is deviation on Stock II's return is stock's systematic risk/beta, Stock percent, and the Stock I beta is percent, and the Stock II beta is . The standar Therefore, based on the is "riskier".
Astromet is financed entirely by common stock and has a beta of 1.20. The firm pays no taxes. The stock has a price-earnings multiple of 11.0 and is priced to offer a 10.9% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.6%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e, stock and debt combined) after the refinancing If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? g-2. Has anything happened to the stock price? Complete this question by entering your answers in the tabs below. Reg A to E Reg F to G2…
Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Recession 0.35 0.06 -0.15 Normal 0.40 0.09 0.16 Boom 0.25 0.13 0.36 Calculate the expected return for the two stocks. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Calculate the standard deviation for the two stocks. Note: Do not round your intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.

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