A. Calculate the expected return of his new portfolio. B. Calculate the covariance of ABC stock returns with the original portfolio. C. Calculate the risk level of the new portfolio.
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- Abigail Grace has a $900,000 fully diversified portfolio. She subsequently inherits ABC Company common stock worth $100,000. Her financial adviser provided her with the following estimates: Risk and Return Characteristics Expected Monthly Returns Standard Deviation of Monthly Returns Original Portfolio 0.67% 2.37% ABC Company 1.25 2.95 The correlation coefficient of ABC stock returns with the original portfolio returns in .40. If Grace sells the ABC stock, she will invest the proceeds in risk-free government securities yielding .42% monthly. Assuming Grace sells the ABC stock and replaces it with the government securities, calculate the Expected return of her new portfolio, which includes the government securities. Covariance of the government security returns with the original portfolio returns. Standard deviation of her new portfolio, which includes the government securities.An investor holds a diversified portfolio consisting of a P20,000 investment in each of 20 different ordinary stocks. The total investment portfolio amounts to P400,000 while the portfolio beta is equal to 1.2. The investor decided to sell one of the ordinary stocks that has a beta equal to 0.7 for P20,000. The investor plans to use the whole proceeds to purchase another ordinary stock that has a beta of 1.4. What will be the beta of the new portfolio? a. 1.165 b. 1.235 c. 1.222 d. 0.07An investor holds a diversified portfolio consisting of a P2,100 investment in each of 10 different common stocks. The portfolio beta is equal to 1.5. You have decided to sell one of your stocks, whose beta is equal to 1, for P2,100 and used the proceeds to buy different P2,100 of stock of a retail company whose beta is 1.2. What will be the new beta of the portfolio? (No rounding off until the final answer)
- Abigail Grace has a $900,000 fully diversified portfolio. She subsequently inherits ABC Company common stock worth $100,000. Her financial adviser provided her with the following estimates: Risk and Return Characteristics Expected Monthly Returns Standard Deviation of Monthly Returns Original Portfolio 0.67% 2.37% ABC Company 1.25 2.95 The correlation coefficient of ABC stock returns with the original portfolio returns in .40. The inheritance changes Grace’s overall portfolio, and she is deciding whether to keep the ABC stock. Assuming Grace keeps the ABC stock, calculate the: Expected return of her new portfolio, which includes the ABC stock. Covariance of ABC stock returns with the original portfolio returns. Standard deviation of her new portfolio, which includes the ABC stock.Johnny holds the following portfolio:Stock Investment BetaA $150,000 1.40B $50,000 0.80C $100,000 1.00D $75,000 1.20Johnny plans to sell Stock A and replace it with Stock E, which has a beta of 0.75. By howmuch will the portfolio beta change? (Please state your answer in 2 decimal points)Suppose Megan owns a two-stock portfolio that invests in Happy Dog Soap Company (HDS) and Black Sheep Broadcasting (BSB). Three-quarters of Megan’s portfolio value consists of Happy Dog Soap’s shares, and the remaining balance consists of Black Sheep Broadcasting’s shares. Each stock’s expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Expected Returns Occurrence HDS BSB Strong 20% 50% 70% Normal 35% 30% 40% Weak 45% -40% -50% Calculate the expected returns for the individual stocks in Megan’s portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. • The expected rate of return on Happy Dog Soap’s stock over the next year is . • The expected rate of return on Black Sheep Broadcasting’s stock over the next…
- David owns a two-stock portfolio that invests in Falcon Freight Company (FF) and Pheasant Pharmaceuticals (PP). Three-quarters of David’s portfolio value consists of FF’s shares, and the balance consists of PP’s shares. Each stock’s expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence Falcon Freight Pheasant Pharmaceuticals Strong 0.50 10% 14% Normal 0.25 6% 8% Weak 0.25 -8% -10% Calculate expected returns for the individual stocks in David’s portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. • The expected rate of return on Falcon Freight’s stock over the next year is . • The expected rate of return on Pheasant Pharmaceuticals’s stock over the next year is . • The expected rate of return on…An investor holds a diversified portfolio with a beta equal to 1.5, consisting of a P100 investment ineach of 10 different common stocks. He sold one of your stocks that has a beta equal to 0.5 for P100.The whole proceeds were used to purchase another stock that has a beta equal to 1. Determine thebeta of the new portfolio?9. Portfolio beta and weights Brandon is an analyst at a wealth management firm. One of his clients holds a $5,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.750 38.00% Arthur Trust Inc. (AT) 20% 1.400 42.00% Li Corp. (LC) 15% 1.300 45.00% Transfer Fuels Co. (TF) 30% 0.500 49.00% Brandon calculated the portfolio’s beta as 0.888 and the portfolio’s required return as 12.6600%. Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 6%, and the market risk premium is 7.50%. A. According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s…
- Mrs. Landis has a 2-stock portfolio with a total value of $520,000. $175,000 is invested in Stock A with a beta of 1.25 and the remainder is invested in Stock B with a beta of 1.25. What is her portfolio's beta?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. Group of answer choices 1.01 1.30 1.25 1.39 1.15Daniel have established an investment portfolio of two stocks A and B five years ago. Required: Assume that expected return of the stock A in his portfolio is 13.2%. The risk premium on the stocks of the same industry are 4.6%, the risk-free rate of return is 4.8% and the inflation rate was 1.5. Calculate beta of this stock using Capital Asset Pricing Model (CAPM)? Assume that Daniel bought 3,000 stock B in the portfolio for total investment of $12,000, now the market price of the stock is $15, the dividend paid for this stock is $2 each year. Calculate the total rate of return of this stock? Assume that the following data available for the portfolio, calculate the expected return, variance and standard deviation of the portfolio given stock A accounts for 35% and stock B accounts for 65% of your portfolio? A B Expected return 19.5% 12.5% Standard Deviation of return 7% 2.5% Correlation of coefficient (p) 0.45AKD investment company invested equal amount in 5 stocks to form investment portfolio that has a beta 1.5. AKD is planning to dispose riskiest stock in the portfolio which has beta co-efficient to 2.2 and replace it with another stock. If AKD replaces its beta 2.2 stock with beta 1.2 stock, (of equal amount), what will be the new beta of his investment portfolio?