please help me check my work and help solve any unsolved questions, thanks! 18. An example of systematic risk is:a. changes in the Federal budget deficit that could affect interest rates or federal taxation.b. a fire at a Dow Chemical Corporation factory.c. the bankruptcy of Pea Pod Corporation.e. the accidental death of the President and CEO of United Amalgam Corporation.f. all of the above.g. none of the above.Questions 19 and 20 are related.19. Assume that two investors each hold a portfolio, and that portfolio is their only asset. Investor A's portfoliohas a beta of minus 2.0, while Investor B's portfolio has a beta of plus 2.0. Assuming that the unsystematicrisks of the stocks in the two portfolios are the same, then:a.the two investors face the same amount of risk.b. Investor A's portfolio has more risk than Investor B's portfolio.C. Investor B's portfolio has more risk than Investor A's portfolio.d. The relative risk of the portfolios cannot be determined without more information.e. None of the above answers is correct.20. With reference to Portfolios A and B in the previous question, the holders of either portfolio could:a. Lower their risks, and by exactly the same amount, by adding some stocks with beta = 1.0.b. Lower their risks, and by exactly the same amount, by adding some stocks with beta > 1.0.C. Lower their risks, and by exactly the same amount, by adding some stocks with beta < 1.0.d. Increase their risks, and by exactly the same amount, by adding some stocks with beta > 2.0.e. Increase their risks, and by exactly the same amount, by adding some stocks with beta < -2.0.f. All of the above answers are correct.g.None of the above answers is correct.Questions 21 and 22 use the data in the table below.21. An investor is considering investing in one of the three stocks shown below:StockABсDStandard Deviation20%10%7%12%Page 4 of 9Beta0.490.610.921.29e. Any of the Stocks would minimize risk if it is to be held in isolation.f. There is not enough information to make the decision.If the stock is to be held in isolation and an investor is a strict risk minimizer, the investor would choose:a. Stock A if it is to be held in isolation.b. Stock B if it is to be held in isolation.c. Stock C if it is to be held in isolation.d. Stock D if it is to be held in isolation.22. If the stock is to be held as part of a well-diversified portfolio and an investor is a strict risk minimizer, theinvestor would choose:a. Stock A if it is to be held in a well-diversified portfolio.b. Stock B if it is to be held in a well-diversified portfolio.C. Stock C if it is to be held in a well-diversified portfolio.d. Stock D if it is to be held in a well-diversified portfolio.e. Any of the Stocks would minimize risk if it is to be held in a well-diversified portfolio.f. There is not enough information to make the decision. Questions 12 and 13 use the Data in the table below.E[R]Std DevWeightCorrelation Coefficient of Stratton & StoweCorrelation Coefficient of Stratton & IceCorrelation Coefficient of Stowe & IceAnswer: 10.14%Answer: 5.94%StrattonCorp.7.80%5.20%30.00%12. Given the Portfolio data in the table above, what is the Expected Return of the Portfolio? Answer as apercentage and round to 1 basis point or 2 decimal places.0.75000.40000.1000a. Remains constantb.Stowe Inc.13. Given the Portfolio data in the table above, what is the Standard Deviation of the Expected Return of thePortfolio? Answer as a percentage and round to 1 basis point or 2 decimal places.Decreasesc. Increasesd.Changes but in an unknown waye. None of the above answers is correct.a. -1.00b. +1.009.20%7.30%40.00%a. What is the best proxy for the "market" portfolio?b. What happens when investors cannot borrow and lend at the risk-free rate?c. How good the Capital Asset Pricing Model is at forecasting?d. What the Beta of the market portfolio of risky assets is?e. What the stability of individual stock betas is?Ice Ltd.14. When applying the Capital Asset Pricing Model to the real world, all of the following questions remain to beanswered EXCEPT:C. 0.00d. Between 0 and -1.00e. Between 0 and +1.0010.30%8.40%40.00%15. According to the CAPM, as the number of assets in a portfolio increases, the amount of unsystematic risk inthe portfolio:Page 3 of 916. According to the CAPM, the correlation coefficient between a perfectly diversified portfolio and the marketportfolio of all risky assets should be:17. According to the Single Index Model, the only systematic influence(s) on common stock prices is:a. growth of the gross national product.b. company-specific or stock-specific risk.c. changes in the relative strength of sectors, or industries, of the economy.d. the return on an index representing the overall stock market.e. all of the above.f. none of the above.

As per the Honor code of Bartleby we are bound to given the answer of first question only, Please…

18. An example of systematic risk is: a. changes in the Federal budget deficit that could affect interest rates or federal taxation. b. a fire at a Dow Chemical Corporation factory. c. the bankruptcy of Pea Pod Corporation. e. the accidental death of the President and CEO of United Amalgam Corporation. f. all of the above. g. none of the above.

18. An example of systematic risk is: a. changes in the Federal budget deficit that could affect interest rates or federal taxation. b. a fire at a Dow Chemical Corporation factory. c. the bankruptcy of Pea Pod Corporation. e. the accidental death of the President and CEO of United Amalgam Corporation. f. all of the above. g. none of the above.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 9PROB

See similar textbooks

Similar questions

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?
An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?
For the above shares if the expected inter correlations are given as follows: Investment in RM millions Weight Correlation Petronas 23 ? 0.15(P,M) Maxis 47 ? 0.25(M,B) Berjaya 40 ? 0.35(B,P) d) Compute Weights e) Compute the expected portfolio return and f) Expected portfolio risk g) Portfolio Sharpe ratio
The table presents the actual return of each sector of the manager's portfolio in column (1), the fraction of the portfolio allocated to each sector in column (2), the benchmark or neutral sector allocations incolumn (3), and the returns of sector indexes in column (4).(1) (2) (3) (4)Actual Actual Benchmark IndexReturn Weight Weight ReturnEquity 15% 80% 60% 10%Bonds 10% 15% 30% 6%Cash 4% 5% 5% 1%What was the manager's return in the month? What was the benchmark's return in the month?
Following is the information is available for company Xian and Yancheng, RX =25%,RY=35%,X=15%,Y=20% 5. a) What is the expected return and standard deviation for a portfolio composed of 70 per cent of Yancheng and 30 per cent of Xian assuming a correlation coefficient of – 0.50 between two shares? b) Whatwillbetheexpectedreturnandstandarddeviationforaboveportfolioifthese two shares are perfectly negatively correlated with each other?
Angela’s portfolio holds security A, which returned 12.0%, security B, which returned 15.0% and security C, which returned -5.0%. At the beginning of the year 45% was invested in security A, 25.0% in security B and the remaining 30% was invested in security C. The correlation between AB is 0.75, between AC 0.35, and between BC -0.5. Securities A's standard deviation is 12%, security B's standard deviations is 15% and security C's is 10%. a) A five-year bond pays interest The par value is GHc 1000 and the coupon rate equals seven (7) percent. If the market's required return on the bond is eight (8) percent, at what market price does this sell for? Literature argues that bond prices are inversely related to interest rates leading to different types of bonds issue. Briefly define Par Bonds, Premium Bonds and Discount Bonds. b) Cal Bank has a corporate bond that matures in two years but makes semi-annual interest The par value is GHc 1000,…
The following portfolios are being considered for investment. During the period under consideration, RFR = 0.07.Portfolio Return Beta σiA 0.15 1.0 0.05B 0.20 1.5 0.10C 0.10 0.6 0.03D 0.17 1.1 0.06Market 0.13 1.0 0.04 a. Compute the Sharpe measure for each portfolio and the market portfolio. b. Compute the Treynor measure for each portfolio and the market portfolio. c. Rank the portfolios using each measure, explaining the cause for any differences you find in the rankings.
Angela’s portfolio holds security A, which returned 12.0%, security B, which returned 15.0% and security C, which returned -5.0%. At the beginning of the year 45% was invested in security A, 25.0% in security B and the remaining 30% was invested in security C. The correlation between AB is 0.75, between AC 0.35, and between BC -0.5. Securities A's standard deviation is 12%, security B's standard deviations is 15% and security C's is 10%. Required: Calculate the: A five-year bond pays interest The par value is GHc 1000 and the coupon rate equals seven (7) percent. If the market's required return on the bond is eight (8) percent, at what market price does this sell for? Literature argues that bond prices are inversely related to interest rates leading to different types of bonds issue. Briefly define Par Bonds, Premium Bonds and Discount Cal Bank has a corporate bond that matures in two years but makes semi-annual interest The par…
Angela’s portfolio holds security A, which returned 12.0%, security B, which returned 15.0% and security C, which returned -5.0%. At the beginning of the year 45% was invested in security A, 25.0% in security B and the remaining 30% was invested in security C. The correlation between AB is 0.75, between AC 0.35, and between BC -0.5. Securities A's standard deviation is 12%, security B's standard deviations is 15% and security C's is 10%. Required: Calculate the: a) Expected return and Portfolio variance of Angela's Portfolio b) Portfolio Standard deviation of What happens to the portfolio risk if market conditions reduce the risk of security B by 50%? c) Explain what happens to a portfolio's overall risk when securities that are uncorrelated are combined.
Angela’s portfolio holds security A, which returned 12.0%, security B, which returned 15.0% and security C, which returned -5.0%. At the beginning of the year 45% was invested in security A, 25.0% in security B and the remaining 30% was invested in security C. The correlation between AB is 0.75, between AC 0.35, and between BC -0.5. Securities A's standard deviation is 12%, security B's standard deviations is 15% and security C's is 10%. Required: Calculate the: a) Expected return and Portfolio variance of Angela's Portfolio b) Portfolio Standard deviation of What happens to the portfolio risk if market conditions reduce the risk of security B by 50%?
The following portfolios are being considered for investment. During the period under consideration, RFR = 0.08. Portfolio Return Beta σi P 0.14 1.00 0.05 Q 0.20 1.30 0.11 R 0.10 0.60 0.03 S 0.17 1.20 0.06 Market 0.12 1.00 0.04 Compute the Sharpe measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Sharpe measure P Q R S Market Compute the Treynor measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Treynor measure P Q R S Market
During a particular investment period, a wealth management company held an investment portfolio that earned an average return of 13% with standard deviation of 30% and beta of 1.5. The average risk-free rate of return during this investment period was 2%. (full process) (a) Calculate the Sharpe and Treynor measures of performance evaluation for this investment portfolio. This investment portfolio is composed of the following two asset classes: Asset Class Weight Return Equity 0.80 15% Bonds 0.20 5% During this particular investment period, the information on a benchmark portfolio is given in the following table. Asset Class Weight Return Equity (S&P500 Index) 0.50 17% Bonds (Lehman Brothers Index) 0.50 5% (b) Determine whether the investment portfolio of the wealth management company performed better than the benchmark portfolio in terms of the total…