Problem set 11

QUESTION 1 Exhibit 5.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)   Stock Rit Rmt ai Beta A 10.6 15 0 0.8 Z 9.8 8.0 0 1.1   Rit = return for stock i during period t Rmt = return for the aggregate market during period t   Refer to Exhibit 5.5. What is the abnormal rate of return for Stock A during period t using only the aggregate market return (ignore differential systematic risk)?   a. 4.40   b. −1.70   c. 3.40   d. −4.40   e. −1.86

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Search Review View Help E A A 而、三 三。 Ji Text Direction Y Align Text v 三三三、 n{} ☆ Arrange Quick Styles Y Convert to SmartArt Paragraph Drawing Examples Given the following information, what is the standard deviation of the returns on this stock? Probability of State of Economy 04 State of Economy Rate of Return Вoom .26 Normal 74 17 Recession 22 -44

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IBM AMZN E(R) 0.07 0.11 Standard Deviation0.10 0.18 Correlation0.45 Suppose you have the above data on IBM and Amazon, compute the expected return and the standard deviation of an equally weighted portfolio invested in the two securitiesis there a diversification benefit? Please show your work and round to at least 3 decimal places

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Please answer question 1 using Microsoft Word Question 1 Fill the parts in above table that are shaded  in yellow. Please show workings

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…

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

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.

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Expected return

estion Completion Status: 20 30 50 60 70 80 90 10 110 12 13 140 150 16 17 18 19 205 QUESTION 12 What type of trading strategy is required to fully capture the risk premium of dynamic investment factors? O A static, long-only or short-only, trading strategy O Statistical arbitrage O Pure arbitrage O Long-short trading strategy QUESTION 13 What quantity is commonly used to rank stocks on the value-growth spectrum? O Sales growth over the past 12 months OBook-to-market ratio 2Market capitalization 2 Age of the firm

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, a.What are the covariance and correlation between the returns of the two stocks? b.Calculate the portfolio return and portfolio standard deviation if you invest equally in each asset.

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Question 1 Fill the parts in the above table that are shaded in yellow.

State of Economy Return on Stock A Return on Stock B Bear .073-094 Normal .134.142 Bull .062.321 Assume each state of the economy is equally likely to happen. a. Calculate the expected return of each stock. (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 of each stock. (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? (A negative answer should be indicated by a minus sign, 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? (A negative answer should be indicated by a minus sign, Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.)

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Year     AT&T Stock Returns       Market Index Returns  1                         8                                        6  2                         7                                        3  3                         10                                     12  4                         14                                     13  5                         8                                        9   The equation of the characteristic line for AT&T is:           Group of answer choices   Return = 0.538 + 0.9200*Market Return Return = -3.089 + 1.2436*Market Return Return = 0.813 + 0.6530*Market Return Return = 0.471 + 0.0311*Market Return Return = 4.578 + 0.5607*Market Return

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d. How would you characterize the correlation of returns of the two stocks L and M? Year 2016 2017 2018 2019 2020 2021 "L 14% 14% 16% 17% 17% 19% ™M 20% 18% 16% 14% 12% 10% Correlation coefficient, PLM

looking for help solving standard deviation for stock x and stock y, preferably with instructions on how to solve in excel.

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A Moving to another question will save this response. Quèstion 12 What is the covariance of returns between stocks A and B? Expected returm of A is 30% and B's expected retum = 23.333333% Year Retum A Return B 2017 40% 55% 2016 30% 35% 2015 20% 20% O 0.025 O 0.07 O None of the listed items is correct O 0.095 A Moving to another question will save this response. MacBook Air esc F2 F3 FS F6 F7 %23 $ & * 2 3 8 Q W E T Y A S D G Z C V alt ption command * 00 つ