PLS HELP ASAP Candidate: SHARMA HimansWhat correlation of returns between two stocks within a portfolio would fully minimize the benefit fromportfolio diversification?AcronymsCalculatorA.0.0.B.+0.5.C.+1.0.D.-1.0. What is one of the main features of hedge funds compared to standard mutual funds?AcronymsCalculatorA.More use of derivatives for leverage.B.Greater daily liquidity.C.Lower minimum investment.D.Higher relative return.SHARMA

The correct option is:D. -1.0.The correlation measure -1.0 of the two stocks in the portfolio…

Answered: HARMA Hima What correlation of returns…

HARMA Hima What correlation of returns between two stocks within a portfolio would fully minimize the benefit from portfolio diversification?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter6: Risk And Return

Section: Chapter Questions

Problem 12MC: Calculate the correlation coefficient between Blandy and the market. Use this and the previously...

See similar textbooks

Related questions

Q: QUESTION 2 The following table contains data on the returns of stock A and stock B from 2021 to…

A: YearsStock AStock B202161320228102023101420241211

Q: The following information will be used to answer questions 8, 9, and 10. Your company can invest in…

A: So the final answers are- 8-A) Payback Period of A = 4.40 years Payback Period of B = 5.05 years…

Q: Last year Carson Industries issued a 10-year, 13% semiannual coupon bond at its par value of $1,000.…

A: To find the bond's nominal yield to maturity (YTM) and its nominal yield to call (YTC), we'll use…

Q: Wendy and Wayne are evaluating a project that requires an initial investment of $792,000 in fixed…

A: Net present value is the capital budgeting metric that evaluates the profitability of the project by…

Q: Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds…

A: After-tax cost of debt refers to an expense that is being incurred over the debt amount borrowed by…

Q: PLS HELP ASAP

A: “Since you have posted multiple questions, we will provide the solution only to the first question…

Q: Suppose that during a 10 year period, a corporation's stock has a 2:1 split. By what percent would…

A: Stock splits are corporate actions in which a company increases the number of its outstanding shares…

Q: Problem 9-5 Calculating Monthly Mortgage Payments [LO9-4] Based on Exhibit 9-9, or using a financial…

A: Loan amount = Present value (PV) = $120,000Year = 15Periods (N) = Year*12 = 15*12 = 180 (because…

Q: Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current…

A: Capital structure of the company consists of debt and equity but the market value of these keeps…

Q: It is now January 1, 2021, and you are considering the purchase of an outstanding bond that was…

A: Yield to maturity refers to the percentage of return on the investment inn bond if held till…

Q: The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past…

A: Part A: Price of a 6-month Put Option To find the price of a 6-month put option using the…

Q: Consider the following information: State of Economy Probability of State of Economy Boom Bust .67…

A: Expected Return assesses the average gains anticipated from a portfolio. Variance gauges the level…

Q: Imagine that you are holding 5,000 shares of stock, currently selling at $40 per share. You are…

A: a) $170,000b) $195,000c)$220,000Explanation: Calculate the value of portfolio (net proceeds from the…

Q: Chase starts an IRA (Individual Retirement Account) at the age of 30 to save for retirement. He…

A: Here,Monthly Deposit in IRA is $400Current Age is 30Retirement Age is 65Number of Years for deposits…

Q: You and your wife are making plans for retirement. You plan on living 25 years after you retire and…

A: The PV of an ordinary annuity shows the present value of all future cash flows discounted at a given…

Q: Find the EAR in each of the following cases. Note: Do not round intermediate calculations and enter…

A: An effective annual rate of interest or E.A.R. is the interest which is earned in real times over a…

Q: Strip Mining Incorporated can develop a new mine at an initial cost of $16 million. The mine will…

A: Cost in year 0 = $16 millionCash inflow in year 1 = $42 millionCost in year 2 = $27 millionTo find:…

Q: Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a…

A: Equivalent Annual Cost (EAC) is a financial metric used to compare different investment or financing…

Q: paying $111 at the end of each month for 6 years. The bank charges interest on the loan at 7.71 %…

A: Monthly payment=$111Number of payment=72Interest rate=7.71%Monthly interest rate=0.6425

Q: You bought an artwork 28 years ago, the current estimated price is $17,601, which reflects an annual…

A: Time = t = 28Current Price of Artwork = $17,601Rate of Return = r = 8%

Q: To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have…

A: Expected Dividend = d1 = $1.45Current Price of Stock = p0 = $25Growth Rate = g = 6.50%Flotation Cost…

Q: The principal of the time value of money is probably the single most important concept in financial…

A: The question is asking us to identify which of the given options is not a variable in the process of…

Q: Marcela took out a $600 discounted loan with a 4% annual interest rate over a period of 8 months.…

A: Effective annual interest rate is referred as the interest rate which is adjusted for compounding…

Q: IBM is planning to produce an expert system based on artificial intelligence and expects the…

A: YearCash Flow0-49000000110000000215000000320000000430000000Rate of return is 12%Project's…

Q: Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a…

A: Equivalent Annual Cost (EAC) is widely used by businesses to assess the economic feasibility of…

Q: A construction management company is examining its cash flow requirements for the next few years.…

A: Future worth is the total value of an investment or asset at a future point in time, taking into…

Q: Ten years ago the Templeton Company issued 28-year bonds with a 9% annual coupon rate at their…

A: The realized rate of return is the annual rate of return earned on the bonds during the holding…

Q: 1. (10 Percent) Ryan Enterprises forecasts the free cash flows (in millions) shown below. Assume the…

A: The objective of the question is to calculate the total corporate value of Ryan Enterprises given…

Q: Xenia has had access to credit since she was 17 because her parents made her an authorized user on…

A: A credit card score, or credit score as it is more widely called, is a number that indicates a…

Q: Marginal Tax Rate Chart Marginal Tax Rate Tax Bracket $0-$10,275 10% $10,276-$41,175 12%…

A: Taxes on taxable income refer to the amount of money that individuals or businesses owe to the…

Q: Suppose you bought a bond with an annual coupon of 6 percent one year ago for $1,170. The bond sells…

A: The answer is in the explanation.Explanation:1. Coupon Payment Calculation: - Coupon Rate: 6% or…

Q: You need a 20-year, fixed-rate mortgage to buy a new home for $210,000. Your mortgage bank will lend…

A: Here,LoanAmount is $210,000Affordable Monthly Payment is $950Tenure of Loan is 240 monthsAPR is 6.1%

Q: Masulis Inc. is considering a project that has the following cash flow and WACC data. What is the…

A: Discounted Payback Period is the duration of time in which the present value of cash flows is equal…

Q: A 3.70 percent coupon municipal bond has 15 years left to maturity and has a price quote of 95.65.…

A: Given Data: Par value5000Coupon Rate3.70%Frequency2

Q: Project A would cost $47,027.00 today and have the following other expected cash flows: $27,934.00…

A: Capital budgeting refers to the concept used for evaluating the viability of the project by the…

Q: Problem 2-17 Margin Interest (LO3, CFA2) Suppose you take out a margin loan for $75,000. The rate…

A: Principal = $75,000Rate = 8.9% per year (as an effective annual rate)Time = 180 days / 365 days (to…

Q: PLS HELP ASAP

A: Exchange-Traded Funds (ETFs) utilize various investment strategies to achieve their objectives,…

Q: Annuity Review Problem: You are buying a perpetuity-immediate that makes annual payments X, X + 1, X…

A: Annuity is series of equal uniform payments that are paid at equal intervals and are in orderly…

Q: Deep Mines Ltd. of Saskatche the company has mineral righ would be associated with ope Cost of new…

A: Net present value is determined by deducting the initial investment from the current value of cash…

Q: 510-515 3. The total capital investment for a hydrometallurgical plant of zinc production is Rs. 10…

Q: Fifty cities provided information on vacancy rates (in %) in local apartments in the following…

A: Part (a-1)Vacancy Rate (%)Frequency0 ≤ x < 3193 ≤ x < 6156 ≤ x < 979 ≤ x < 12512 ≤ x…

Q: You have just purchased a share of stock for $21.13. The company is expected to pay a dividend of…

A: We are given the following data -Share Purchase price : $21.13Dividend to be paid : $0.61 per…

Q: The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 15…

A: A bond is a debt market security offering fixed periodic coupons with the promise to repay the…

Q: FIN 3010 CASH BUDGET ASSIGNMENT QUESTION ONE Kupa Ltd. has approached their local banker for an…

A: The objective of the question is to prepare a cash budget for Kupa Ltd. for the first six months of…

Q: Required information [The following information applies to the questions displayed below.] A pension…

A: Expected return of Stock fund (S)17%Expected return of bond fund (B)11%Risk-free rate…

Q: 8) Club 8 is offering preferred stock which is referred to as 10-10 stock. This stock will pay an…

A: Preferred stock is a financial instrument that offers the investor assured regular income until it…

Q: Consider a 30-year bond with a 10% coupon rate (annual payments) and a $100 face va the initial…

A: The objective of this question is to calculate the initial price of a bond given its coupon rate,…

Q: Silvia is 20 years old and has just started working. She will work until age 67 and live to age 87.…

A: Present value:Present value calculations are essential in various financial contexts, including…

Q: Rare Agri-Products Ltd. is considering a new project with a projected Life of seven (7) years.…

A: Cost of capital is the weighted cost of equity and weighted cost of debt and is the minimum required…

Q: Year 1 Year 2 Year 3 Year 4 Unit sales Sales price 4,200 4,100 4,300 4,400 $29.82 $30.00 $30.31…

A: To solve this question, first need to determine the cash flow for each year. NPV assesses the…

Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

PLS HELP ASAP

Candidate: SHARMA Himans
What correlation of returns between two stocks within a portfolio would fully minimize the benefit from
portfolio diversification?
Acronyms
Calculator
A.
0.0.
B.
+0.5.
C.
+1.0.
D.
-1.0.

What is one of the main features of hedge funds compared to standard mutual funds?
Acronyms
Calculator
A.
More use of derivatives for leverage.
B.
Greater daily liquidity.
C.
Lower minimum investment.
D.
Higher relative return.
SHARMA

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Question 1:

VIEW

Step 2: Question 2:

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Calculate the correlation coefficient between Blandy and the market. Use this and the previously calculated (or given) standard deviations of Blandy and the market to estimate Blandy’s beta. Does Blandy contribute more or less risk to a well-diversified portfolio than does the average stock? Use the SML to estimate Blandy’s required return.
d) Is the combination of the above stock can be considered as an optimum diversification?Justify your answer. e) Calculate the portfolio return for each alternative.Note: No need excel formula
Which of the following correlation coefficients will produce the most diversification benefits when adding an additional stock to a portfolio? Group of answer choices -0.6 -0.9 0 0.4
c) Calculate the covariance for the above stock.d) Is the combination of the above stock can be considered as an optimum diversification?Justify your answer.
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM Investment Beta Analyst's Estimated Return Stock X 2.3 15.5% Stock Y 1.2 13.6% Market Portfolio 1.0 11.5% Risk-free rate 4.0% What is the required rate of return for Stock X based on the capital asset pricing model (CAPM)?
Questions C is required. Thank you.c) Assume that using the Security Market Line (SML) the required rate of return (RA) on stock A is found to be half of the required return (RB) on stock B. The risk-free rate (Rf) is one-fourth of the required return on A. Return on market portfolio is denoted by RM. Find the ratio of beta of A (A) to beta of B (B).
Question: Assume that using the Security Market Line (SML) the required rate of return (RA) on stock A is found to be half of the required return (RB) on stock B. The risk-free rate (Rf) is one-fourth of the required return on A. Return on market portfolio is denoted by RM. Find the ratio of beta of A to beta of B. (Please show workings clearly)
Assume that using the Security Market Line(SML) the required rate of return(RA)on stock A is found to be halfof the required return (RB) on stock B. The risk-free rate (Rf) is one-fourthof the required return on A. Return on market portfolio is denoted by RM. Find the ratioof betaof A(A) tobeta of B(B). Thank you for your help.
Consider the two (excess return) index model regression results for well-diversified portfolios A and B: RAt = 0.02 + 1.0 × Rmt + eAt RBt = 0.03 + 0.85 × Rmt + eBt In addition, you know that the standard deviation of the index is 20%. Calculate the covariance between the excess returns of portfolio A and B. Briefly discuss your results.
A portfolio consisting of two assets has a correlation coefficient of 0.7. Another two-asset portfolio has a correlation coefficient of -0.6. In the absence of any other information, which portfolio should you invest in, if your main goal is to eliminate risk? Justify your reasoning. How does your answer change if your main goal is to take a certain market view and hence make a side bet? Explain more generally the advantages and disadvantages of using correlation in the decision-making process within a portfolio management context. Make sure to mention what correlation is, and what is not, as a metric tool for investment decisions.
Question: Assume that using the Security Market Line (SML) the required rate of return (RA) on stock A is found to be half of the required return (RB) on stock B. The risk-free rate (Rf) is one-fourth of the required return on A. Return on market portfolio is denoted by RM. Find the ratio of beta of A to beta of B.
We believe that the single factor model can predict any individual asset’s realized rate of return well. Both Portfolio A and Portfolio B are well-diversified: ri = E(ri) + βiF + Ei, where E(ei) = 0 and Cov(F, i) = 0 A B β 1.2 0.8 E(r) 0.1 0.08 (1) What is the rate of return of the risk-free asset? (2) What is the expected rate of return of the well-diversified portfolio C with βC = 1.6, which also exists in the market? (3) A fund constructs a well-diversified portfolio D. Studies show that βD = 0.6. The expected rate of return of D is 0.06. Is there an arbitrage opportunity? If so, construct a trading strategy to earn profits with no risk. If not, why?