Mrs Gomez has a portfolio with an expected return of 7%. The portfolio is evenly invested in a stock and a risk-free asset. The market has an expected return of 12% and the risk-free asset has an expected return of 4%. What is the beta of the stock? a) 0.50 b) 0.75 Od 1.00 d) 1.25 e) 1.50
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- A share of stock of A-Star Inc. is now selling for $23.50. A financial analyst summarizes the uncertainty about the rate of return on the stock by specifying three possible scenarios: Business Condition Scenario, s Probability, p(s) End of Year Price Annual Dividend High growth 1 0.35 $35 $ 4.40 Normal growth 2 0.30 27 4.00 No growth 3 0.35 15 4.00 What are the holding-period returns for a one-year investment in the stock of A-Star Inc. for each of the three scenarios? Calculate the expected HPR and standard deviation of the HPR.Suppose XYZ Corporation's stock price rises or falls with equal probability by $25 each month, starting where it ended the previous month. What is the value of a three month at the-money European call option on XYZ's stock if the stock is priced at $100 when the option is purchased?$______Mr Phiri has K10,000 in his account. He is considering investing in a project which has 70 % probability of earning a profit of K10,000 and a 30% probability of incurring a loss of K10,000. His utility at the moment is 20 utiles with the current K10,000. With K20, 000 his utility would be 25 utiles and with K0 his utility would be zero. a) What is the expected profit of the project? b) What is the expected marginal utility of the project? Is Mr Phiri likely to invest in the project? Mr Sinkala also has K10,000 from which he derives 20 utiles. However, Mr Phiri derives 15 utiles from the profit of K10,000. c) What is the expected marginal utility for Mr Sinkala? d) How can you describe Mr Phiri and Mr Sinkala in terms of their attitude towards risk?
- Mr Phiri has K10,000 in his account. He is considering investing in a project which has 70 % probability of earning a profit of K10,000 and a 30% probability of incurring a loss of K10,000. His utility at the moment is 20 utiles with the current K10,000. With K20, 000 his utility would be 25 utiles and with K0 his utility would be zero.a) What is the expected profit of the project? b) What is the expected marginal utility of the project? Is Mr Phiri likely to invest in the project? Mr Sinkala also has K10,000 from which he derives 20 utiles. However, Mr Phiri derives 15 utiles from the profit of K10,000.c) What is the expected marginal utility for Mr Sinkala? d) How can you describe Mr Phiri and Mr Sinkala in terms of their attitude towards risk?Pls do fast and i will rate instantly for sure Solution must be in typed form Calculate the covariance for the returns of stock 1 and stock 2 given the six years of historical returns presented below: Given that the standard deviation of stock 1 and stock 2 in the table above is 0.2236 and 0.3225, respectively, use your answer in (A) to calculate and interpret the correlation between the 2 assets. Based on the characteristics of NSC and JSE above you are considering forming a portfolio comprising the two stocks such that you invest the following amounts: i. $40000 and $60000 in company NSC and JSE respectively in the first instance, and alternatively ii. $70000 and $30000 in company NSC and JSE respectively. C. What is the expected return and standard deviation of the portfolio in the two instances above? What is the expected return and standard deviation of the portfolio in the two instances above?A global equity manager is assigned to select stocks from a universe of large stocks throughout the world. The manager will be evaluated by comparing her returns to the return on the MSCI World Market Portfolio, but she is free to hold stocks from various countries in whatever proportions she finds desirable. Results for a given month are contained in the following table: Country Weight InMSCI Index Manager’sWeight Manager’s Returnin Country Return of Stock Indexfor That Country U.K. 0.29 0.24 22% 15% Japan 0.42 0.2 17 17 U.S. 0.23 0.22 10 13 Germany 0.06 0.34 7 15 Required: a. Calculate the total value added of all the manager’s decisions this period. (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.) b. Calculate the value added (or subtracted) by her country allocation decisions. (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount…
- Domingo has a total wealth of $500,000 composed of a house worth $100,000 and $400,000 in cash. He keeps the cash in a safe deposit box, so that it is completely safe. However, there is a 10% chance that his house will burn down by the end of the year and be worth nothing and a 90% chance that nothing will happen to it. Without insurance, the expected value of his end-of-year wealth is: Select one: a. $410,000. b. $490,000. c. $450,000. d. $485,000.Q1. A farmer believes there is a 50-50 chance that the next growing season will be abnormally rainy. His expected utility function has the form Expected utility = 0.5lnYNR + 0.5lnYR Where and represent the farmers income in the state of ‘normal rain’ and ‘rainy’ respectively. Suppose the farmer must choose between two crops that promise the following income prospects Crop YNR YR Wheat $83,000 $10,000 Maize $83,000 $15000 What mix of wheat and maize would provide maximum expected utility to this farmer?A university student recieved $1,000 upon graduation at age 20 years. This person washired by one of the largest global petrochemical companies soon after graduation withan expected annual income of $250. Assume that the retirement age is 65 years andlife expectancy is 85 years in the country in which the student resides. Given that thiscountry has zero real interest rate and consumption smoothing is optimal for allindividuals:a. Derive an expression for the person’s average propensity to consume.b. State in one sentence how the consumption puzzle is addressed
- Only typed answer Assume the correlation of returns between KO and the market portfolio equals 0.80, the standard deviation of KO equals 0.60, and the standard deviation for the market portfolio equals 0.30. What is the beta for KO.In the past four years, the annual returns of one company’s stockare 12%, 18%, and –14%, and 7%.a) What is the geometric average return? b) What is the arithmetic average of the returns? c) According to an economist’ forecast on the Year 2020, the probabilities of repeatingthe performances of the former four years are 30%, 30%, 20%, and 20%, respectively.What is the expected return of the stock in the Year 2020A stock currently sells for 11 TL per share and pays 0.16 TL per year in dividends. What is an investor's valuation of this stock if she expects it to be selling for 14 TL in one year and requires a 10 % return on equity investments? a. 12,89% b. 12,73% c. 12,87% d. 10%