RED 502 HW8

QUESTION 9 Use the data in the table shown below. What is the geometric average return over the span of three years? Date 12/31/2018 12/31/2019 12/31/2020 12/31/2021 O a. 28.7% O b.7.5% c.9.5% O d. 8.9% Price $43.00 $45.60 $42.60 $52.50 Dividend $0.80 $0.80 $0.90

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#9 Cost of equity

Chapter 11, Question 4

V Question 8 As the Head of Business Development of Fidelity Venture Capital, a client has presented a business plan that has the following projected returns for your consideration; a. Stock A Stock B State of the Economy Returns Prob Returns Prob Excellent 32% 0.4 40% 0.2 Worse -5% 0.4 8% 0.3 Normal 21. % 0.2 25% 0.5 Required: i. Calculate the expected return for each stock ii. Calculate the total risk of the client's business for each stock iii. If your client plans investing equally in each stock, with a correlation coefficient of -0.8, what is the portfolio return and portfolio risk? iv. If the beta of the client's business is 0.9 and the risk free rate is 22%, calculate the required rate of investment if the market risk premium is 4%. Question 9

Question 3 You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for a ¢1,000 investment in each stock under four different economic conditions has the following probability distribution: Returns Probability Economic Condition Stock X Stock Y 0.1 Recession -50 -100 0.3 Slow Growth 20 50 0.4 Moderate Growth 100 130 0.2 Fast Growth 150 200 (a) Which of the investments has a better return and why? (b) Which of the investments is relatively less risky and why? (c) What type of association exists between the two-investment options X and Y? Interpret your results.

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Intro You've assembled the following portfolio: Stock Exp. return Investment 1 6.9% 2 14.7% 3 16.3% Part 1 What is the expected return of the portfolio? 3+ decimals Submit $5,000 $12,000 $7,000

Part D to Mod 4 Question 6

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QUESTION 3 – Risk and ReturnSintok Corporation has collected information on the following three investments. Which investment is the most favourable based on the information presented?Stock A Stock B Stock CProbability Return Probability Return Probability Return0.15 2% 0.25 -3% 0.1 -5%0.4 7% 0.5 20% 0.4 10%0.3 10% 0.25 25% 0.3 15%0.15 15% 0.2 30%

QUESTION 15 If you invest $45,000 in the market index and $30,000 in a risk free investment what is the beta risk of your investment? O 0.30 O 0.40 O 0.45 0.60

Portfolio management Q9

Question 3 of 4 0/0.5 View Policies Show Attempt History Current Attempt in Progress Your answer is incorrect. You know that the return of Wildhorse Cyclicals common shares is 1.1 times as sensitive to macroeconomic information as the return of the market. If the risk-free rate of return is 4.60 percent and market risk premium is 5.71 percent, what is Wildhorse Cyclicals' cost of common equity capital? (Round intermediate calculation to 5 decimal places, e.g. 1.25140 and final answer to 2 decimal places, e.g. 15.25%.) Cost of common equity capital eTextbook and Media Save for Later Attempts: 2 of 3 used Submit Answer APR 山T( !!

Question 16 a. Based on the following information, calculate the expected return and standard deviation for each of the following stocks. What are the covariance and correlation between the returns of the two stocks? Calculate the portfolio return and portfolio standard deviation if you invest equally in each asset. Returns State of Economy Prob J K Recession 0.25 -0.02 0.034 Normal 0.6 0.138 0.062 Boom 0.15 0.218 0.092 b. A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent. The risk-free rate is 4 percent, and the Page 7 of 33 expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .45 correlation with the market portfolio and a standard deviation of 55 percent? c. Suppose the risk-free rate is 4.2 percent and the market portfolio has an expected return of 10.9 percent. The market…

A4 5a Consider the following information on three stocks in four possible future states of the economy:       Rate of return if state occurs State of economy Probability of state of economy Stock A Stock B Stock C Boom 0.3 0.35 0.45 0.38 Good 0.3 0.15 0.20 0.12 Poor 0.3 0.05 –0.10 –0.05 Bust 0.1 0.00 –0.30 –0.10   a. Your portfolio is invested 30% in A, 50% in B, and 20% in C. What is the expected return of your portfolio?

Question 25 (2.5 points) Listen The risk-free rate is 1.45% and the market risk premium is 5.21%. According to the Capital Asset Pricing Model (CAPM), a stock with a beta of 1.13 will have an %. expected return of 1) 7.34% 2) 15.66% 3) 5.56% 4) 9.12% 5) 13.25%

Question # 7 A Report a Problem G Revisit Choo A portfolio consists of three stocks A,B and C with sharpe ratios of 1.5,2 and 2.5 respectively. Calculate the proportion of investment in stock A. O 02 O. Deepanshu | Support +1 650-924-9221 +91 80

Returns State of Economy Prob J K Recession 0.25 -0.02 0.034 Normal 0.6 0.138 0.062 Boom 0.15 0.218 0.092 Based on the following information, 1. calculate the expected return and standard deviation for each of the following stocks. 2.What are the covariance and correlation between the returns of the two stocks? 3.Calculate the portfolio return and portfolio standard deviation if you invest equally in each asset.

Business 123 Introduction to Investments May I please have the solution for the following assigment? Thank you so much!

9 Hangtive Degrees of Fleedem Your portfolio consists of 100 shares of CSH and 50 shares of EJH, which you just bought at $20 and $30 per share, respectively. a. What fraction of your portfolio is invested in CSH? In EJH? b. If CSH increases to $23 and EJH decreases to $29, what is the return on your portfolio? a. What fraction of your portfolio is invested in CSH? In EJH? The fraction invested in CSH is %. (Round to one decimal place.)

Question 25 What is the correlation between Stock 1 and Stock 2's returns? Expected Return Probability Stock 1 Stock 2 Good Economy 0.25 0.81 0.02 Okay Economy 0.35 0.19 -0.06 Bad Economy 0.40 -0.50 -0.28

Question 5You have been approached by Onua Do Ltd who wants to know how their portfolio is fairing. The Company has over the years spread their funds in this order: 30% stock in A, 50% stock in B and the rest in stock C.State of EconomyBoom Normal RecessionProbability Stock A Return0.10 24% 0.70 11% 0.20 -30%Stock B Return 5%6%7%Stock C Return 14% 9% -5%a). What is the standard deviation of their portfolio?b). Explain the following and analyze how they affects trading decision(s) making andanalysis of investments:i) Snakebite effectii) House-moneyeffect iii) Endowment effect iv) Disposition effect v) Overconfidence

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Tiempo restante U:28:23 What is the beta of a portfolio that has $18,400 in Stock M, $6,320 in Stock N, $32,900 in Stock O and $11,850 in Stock P. Their Betas are .97, 1.04, 1.23, and .88, respectivley? O a. 1.04 O b. 1.11 О с. 1.08 O d. 1.15 O e. .99

A4 5c Consider the following information on three stocks in four possible future states of the economy:    State of economy Probability of state of economy Stock A Stock B Stock C Boom 0.3 0.35 0.45 0.38 Good 0.3 0.15 0.20 0.12 Poor 0.3 0.05 –0.10 –0.05 Bust 0.1 0.00 –0.30 –0.10  stock A: State of economy Probability Rate of return Average (a) (b) (c) (d = b × c)(d = b × c) Boom 0.3 0.35 0.105 Good 0.3 0.15 0.045 Poor 0.3 0.05 0.015 Bust 0.1 0 0 Expected rate of return 0.165   stock B: State of economy Probability Rate of return Average (a) (b) (c) (d = b × c)(d = b × c) Boom 0.3 0.45 0.135 Good 0.3 0.2 0.06 Poor 0.3 -0.1 -0.03 Bust 0.1 -0.3 -0.03 Expected rate of return 0.135 Stock C: State of economy Probability Rate of return Average (a) (b) (c) (d = b × c)(d = b…

15 [Question text] Based on the following information, what is the expected return for the following stock?     State of Economy Probability of State of Economy Rate of Return if State Occurs Boom 0.06 -6% Normal 0.74 7% Recession 0.20 18%   Select one: A. 8.80 percent B. 8.23 percent C. 8.53 percent D. 8.42 percent

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