1 2 3 4 5 Stock A 0.11 0.07 0.14 -0.02 0.07 Stock B 0.06 0.01 0.04 0.02 -0.03 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.46, what is the expected return and standard deviation of a portfolio of 73% stock A and 27% stock B?
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- The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market return is 20%. If the correlation between Stock A and the market is 0.70, then what is Stock A’s beta?Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an expected return of 18% and a standard deviation of 60%. The correlation coefficient between Stocks A and B is 0.2. What are the expected return and standard deviation of a portfolio invested 30% in Stock A and 70% in Stock B?8. Stocks A and B have the following returns (see Pearson MyLab Finance for the data in Excel format): Stock A Stock B 1 0.08 0.05 2 0.04 0.04 3 0.14 0.05 4 -0.05 0.01 5 0.08 -0.01 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.48 what is the expected return and standard deviation of a portfolio of 65% stock A and 35% stock B?
- A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance between Stock X and Stock Y is 0.10. The standard deviation of Stock X is 0.50, and the standard deviation of Stock Y is 0.50. Which of the following comes closest to the correlation coefficient between Stock X and Stock Y? Select one: a. 0.60 b. 0.50 c. 1.00 d. 0.00 e. 0.40QG. The following information is available about the stocks of two companies A and B: Stock A Stock B Expected Return (%) Probability -5 12 15 20 0.05 0.55 0.35 0.05 Expected Return (%) Probability 5 15 18 20 0.05 0.65 0.20 0.10 Stock Standard Deviation of Returns (%) A B 25 35 The coefficient of correlation between the returns on A and B is 0.05. A portfolio is constructed by allocating the funds between A and B in the ratio of 2:3. Calculate the expected return on the portfolio. b. Calculate the portfolio risk.Stocks A and B have the following returns: Stock A Stock B 1 0.09 0.06 0.05 0.02 3 0.13 0.05 4 - 0.01 0.02 5 0.08 - 0.03 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.48, what is the expected return and standard deviation of a portfolio of 52% stock A and 48% stock B? a. What are the expected returns of the two stocks The expected return for stock A is 1. (Round to three decimal places.) The expected return for stock B is 1. (Round to three decimal places.) b. What are the standard deviations of the returns of the two stocks? The standard deviation of the return for stock A is 1. (Round to four decimal places.) The standard deviation of the return for stock B is 1. (Round to four decimal places.) c. If their correlation is 0.48, what is the expected return and standard deviation of a portfolio of 52% stock A and 48% stock B? The expected return for the portfolio is 1. (Round to four…
- Consider information given in the table below and answers the question asked thereafter: State Probability return on stock A Return on stock B A 0.15 10% 9% B 0.15 6% 15% C 0.10 20% 10% D 0.18 5% -8% E 0.12 -10% 20% F 0.30 8% 5% Calculate covariance and coefficient of correlation between the returns of thestocks A and B.v. Now suppose you have $100,000 to invest and you want to a hold a portfoliocomprising of $45,000 invested in stock A and remaining amount in stock B.Calculate risk and return of your portfolio.The index model has been estimated for stocks A and B with the following results: RA = 0.12 + 0.610RM + eA RB = 0.04 + 1.416RM + eB σM = 0.270 σ(eA) = 0.20 σ(eB) = 0.10 What is the covariance between each stock and the market index?What is the standard deviation of stock A if it has the following probabilities and rate of returns. Probability Return 0.3 -5% 0.4 14% 0.3 11% a. 9.11% b. 9.40% c. 8.62% d. 8.21%
- Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 2 0.20 13% 7% 3 0.20 12% 6% 4 0.30 14% 9% 5 0.20 15% 8% The coefficient of correlation between A and B is:a. What is the expected return for each stock b. What is the standard deviation for each stock, the expected return of the portfolio of the two stocks using the various percentages allocated to each (50%-50%, 75%-25%, 25%-75%)Consider the following information about two stocks (D and E) and two common risk factors (1 and 2) ba 1.6 2.1 Stock D E ba E(R.) 3.1 14.45% 2.1 13.90% a. Assuming that the risk-free rate is 5.5%, calculate the levels of the factor risk premia that are consistent with the reported values for the factor betas and the expected returns for the two stocks. Round your answers to one decimal place Axt Ax b. You expect that in one year the prices for Stocks D and I will be $51 and $39, respectively. Also, neither stock is expected to pay a dividend over the next year. What should the price of each stock be today to be consistent with the expected return levets listed at the beginning of the problem? Round your answers to the nearest cent. Today's price for Stock D: Today's price for Stock E: S Suppose now that the risk premium for Factor 1 that you calculated in Part a suddenly increases by 0.33% 0e, from x to (-0.35%, where is the value established in Part . What are the new expected returns…