Q1Based on the following information: |
State of Economy | Probability of State of Economy |
Rate of Return if State Occurs |
Depression | .12 | −.103 |
Recession | .23 | .061 |
Normal | .47 | .132 |
Boom | .18 | .213 |
|
Calculate the expected return. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
Expected return | [removed] % |
Calculate the standard deviation. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
Standard deviation | [removed] % |
Q2.Consider the following information: |
Rate of Return if State Occurs | ||||||||||||
State of | Probability of |
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||||||||||
Economy | State of Economy | Stock A | Stock B | Stock C | ||||||||
Boom | .15 | .37 | .47 | .27 | ||||||||
Good | .45 | .22 | .18 | .11 | ||||||||
Poor | .35 | − | .04 | − | .07 | − | .05 | |||||
Bust | .05 | − | .18 | − | .22 | − | .08 | |||||
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a. | Your portfolio is invested 20 percent each in A and C, and 60 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16)) |
Expected return | [removed] % |
b-1. | What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places. (e.g., 32.16161)) |
Variance | [removed] |
b-2. | What is the standard deviation? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16)) |
Standard deviation | [removed] % |
Q3.Stock Y has a beta of 1.8 and an expected return of 18.2 percent. Stock Z has a beta of 0.8 and an expected return of 9.6 percent. If the risk-free rate is 5.2 percent and the market risk premium is 6.7 percent, the reward-to-risk ratios for stocks Y and Z are [removed] and [removed] percent, respectively. Since the SML reward-to-risk is [removed] percent
Q4. Based on the following information: |
State of Economy |
Return on Stock A |
Return on Stock B |
Bear | .107 | −.050 |
Normal | .110 | .153 |
Bull | .078 | .238 |
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Assume each state of the economy is equally likely to happen. |
Calculate the expected return of each of the following stocks. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) |
Expected return | |
Stock A | [removed]% |
Stock B | [removed]% |
|
Calculate the standard deviation of each of the following stocks. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) |
Standard deviation | |
Stock A | [removed]% |
Stock B | [removed]% |
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What is the covariance between the returns of the two stocks? (Negative amount should be indicated by a minus sign, Do not round intermediate calculation and round your final answer to 6 decimal places. (e.g., 32.161616)) |
Covariance | [removed] |
What is the correlation between the returns of the two stocks? (Negative amount should be indicated by a minus sign, Do not round intermediate calculation round your final answer to 4 decimal places. (e.g., 32.1616)) |
Correlation | [removed] |