Consider a capital market with only two risky assets A and B. Their standard deviations are 1 and 2, respectively. There is no risk-free asset. When the correlation coefficient ρAB = 0, construct a portfolio, whose variance is strictly less than 1. [Hint: you may want to try the portfolio that puts more weight on the security with the lower standard deviation.]
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Consider a capital market with only two risky assets A and B. Their standard deviations are 1 and 2, respectively. There is no risk-free asset.
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- Stock X has an expected return of 13 percent, a standard deviation of returns of 14 percent, a correlation coefficient with the market of 0.7, and a beta coefficient of 1.1. Stock Y has an expected return of 6 percent, a standard deviation of 35 percent, a –0.3 correlation with the market, and a beta of –0.6. Which security would be riskier if it were held as part of a diversified portfolio? a. Stock Y b. Both would be equally risky. c. Stock XA portfolio with a beta of 0.7 with market and residual variance of 10, market variance being 196 , the total risk in terms of standard deviation of the fund is a. 10.30 b. 14 c. 10 d. 7Suppose that the index model for two Canadian stocks HD and ML is estimated with the following results: RHD =-0.03+2.10RM+eHD R-squared =0.7 RML =0.06+1.60RM+eML R-squared =0.6 σM =0.15 where M is S&P/TSX Comp Index and RX is the excess return of stock X. What is the covariance and the correlation coefficient between HD and ML? For portfolio P with investment proportion of 0.4 in HD and 0.6 in ML, calculate the systematic risk, non-systematic risk, and total risk of P.
- . you are interested in whether excess risk-adjusted return (alpha) is correlated with mutual fund expense ratios for uS large-cap growth funds. The following table presents the sample. Mutual Fund. 1 2 3 4 5 6 7 8 9 -0.52 -0.13 -0.6 -1.01 -0.26 -0.89 -0.42 -0.23 -0.6 Alpha(X) Expense Ratio 1.34 0.92 1.02 1.45 1.35 0.5 1 1.5 1.45 Formulate null and alternative hypotheses consistent with the verbal description of the research goal. identify the test statistic for conducting a test of the hypotheses in Part a. Justify your selection in Part b. D. Determine whether or not to reject the null hypothesis at the 0.05 level of signifi- cance.D & R A1 10 - 3 Question 10. Minimum Variance Commodity Hedge Choc Full of Good Inc., a producer of powdered hot chocolate, has just received a large order that will require the purchase of 800 metric tons of cocoa in 3 months. The current spot price of cocoa is US $3,055 per metric ton. The standard deviation of the change in spot cocoa price is 0.2. Mr. Dulce, the CFO of Choc Full, is considering a minimum-variance hedge of this future cocoa purchase using the three-month cocoa futures contract. The contract size is 10 metric tons. The standard deviation of the change in cocoa futures price is 0.25. The covariance between the change in the spot and futures cocoa price is 0.035. The annually compounded interest rate faced by the company is 5%, the three-month storage cost is $2.5 per metric ton, and the convenience yield is $0.5 per metric ton. Compute the minimum-variance hedge ratio.D & R A1 10 - 7 Question 10. Minimum Variance Commodity Hedge Choc Full of Good Inc., a producer of powdered hot chocolate, has just received a large order that will require the purchase of 800 metric tons of cocoa in 3 months. The current spot price of cocoa is US $3,055 per metric ton. The standard deviation of the change in spot cocoa price is 0.2. Mr. Dulce, the CFO of Choc Full, is considering a minimum-variance hedge of this future cocoa purchase using the three-month cocoa futures contract. The contract size is 10 metric tons. The standard deviation of the change in cocoa futures price is 0.25. The covariance between the change in the spot and futures cocoa price is 0.035. The annually compounded interest rate faced by the company is 5%, the three-month storage cost is $2.5 per metric ton, and the convenience yield is $0.5 per metric ton. What is the correlation of the change in the spot and futures cocoa price?
- Suppose that the index model for two Canadian stocks HD and ML is estimated with the following results: RHD =-0.03+2.10RM+eHD R-squared =0.7 RML =0.06+1.60RM+eML R-squared =0.6 σM =0.15 where M is S&P/TSX Comp Index and RX is the excess return of stock X. What is the covariance and the correlation coefficient between HD and ML?which of the following individuals is likely to be excluded from a clinical trial? a-individual with other diseases besides the disease of interest b-an individual whose data is considered to be an outlier c-an individual of who is considered to be a minority d-an individual who will have difficulty complying trial protocols.A proposed project has the following cash flow estimates.Assuming statistically independent cash flows, a normally distributed net present value, and a minimum attractive rate of return of 15%, determine the following. For the following questions, employ an analytical solution: a. the mean and standard deviation of net present value. b. the probability that the net present value is negative. c. the probability that the net present value is greater than $1,000,000. Assume the initial investment and annual receipts are normally distributed. d. Using a Monte Carlo simulation with 10,000 iterations, estimate the probability that the present worth is negative.
- A proposed project has the following cash flow estimates. Assuming independent cash flows, a normally distributed net present value, and a minimum attractive rate of return of 18%, determine the following. For the following questions, employ an analytical solution: a. The mean and standard deviation of net present value. b. The probability that the net present value is positive. c. The probability that the net present value is greater than $5,000. Assume the initial investment and annual receipts are normally distributed. d. Using a Monte Carlo simulation with 10,000 iterations, estimate the probability that the present worth is positive and estimate the probability that the present worth is greater than $5,000.A random sample of 20 individuals who graduated from harvard ago were asked to report the total amount of debt they had when they graduated from college and the total value of their current investments. the data set is below: Debt Invested 23719 25664 2327 63658 23846 23405 12262 43385 18480 32649 7823 54587 10857 45145 10085 48262 14813 40983 2299 65308 18154 31977 16650 39308 16699 34346 19120 35813 10809 47704 19566 32805 8679 50647 16647 34555 17952 33647 5454 59726 A) using a regression equation for predicting current investment based on college debt. What is the expected change in current investment for each additional dollar of harvard college debt? i got -1.8668 B) What is the predicted current investment for an individual who had a college debt of $5000? i got 58,629C) What proportion of the variation in current investment is explained by college debt? round to 4 decimal places only C needs to be answered