P(State)Consider the following information on two stocks:Stock A Stock BBoom20%30%20%Normal50%12%-5%Slow15%4%8%Recession15%-10%10%$Investment BetaAsset A $35,000 1.45Asset B$15,0000.85Assuming a risk-free rate of 5%, calculate the portfolio's Sharpe Ratio. (Round to 4 decimals;hint: Sharpe ratio = (E(Ret) - Rf))/stdev).

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Answered: P(State) Consider the following…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 10PROB

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A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per share (D1 = $4), and it is expected to grow at some constant rate, g, throughout time. The stock’s required rate of return is 14% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of gL?
Consider the following information on two stocks: P(State) Stock A Stock B Boom 20% 30% 20% Normal 50% 12% -5% Slow 15% 4% 8% Recession 15% -10% 10% $Investment Beta Asset A $35,000 1.45 Asset B $15,000 0.85 Q1. Calculate the weight of A in the portfolio. (Enter percentages as decimals and round to 4 decimals) Q2. Calculate the expected return on the portfolio. (Enter percentages as decimals and round to 4 decimals) Q3. Calculate the standard deviation of the portfolio. (Enter percentages as decimals and round to 4 decimals).
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Consider the following information on two stocks: P(State) Stock A Stock B Boom 20% 30% 25% Normal 30% 15% -5% Slow 40% -5% 5% Bust 10% -12% 0% A) Calculate the covariance(A,B). B) Calculate the correlation(A,B). C) Suppose you invest $60,000 into stock A, and $40,000 into stock B. Calculate the expected return of the portfolio. (Enter percentages as decimals and round to 4 decimals) D) Suppose you invest $60,000 into stock A, and $40,000 into stock B. Calculate the standard deviation of the portfolio. (Enter percentages as decimals and round to 4 decimals)
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Stock Dollar investment Beta A $300,000 1.20 B 200,000 1.60 C 500,000 0.65 D 0 -0.20 Total investment $1,000,000 The market's required return is 10% and the risk-free rate is 3%. What is the portfolio's required return? Do not round intermediate calculations. Round your answer to three decimal places.
Use the following information to answer questions 1- 2 XQV’s stock is trading at $40. Earnings per share are expected at E1 = $5.00; all will be paid out as dividends. Valuing the stock as a perpetuity P0 =E1 / r, the expected return is 12.5%. The risk-free rate is 6%; the market risk premium is 8%. XQV’s beta is 0.875. The stock is ………………………………………………….. Group of answer choices a. overpriced b. fairly priced c. underpriced 2. Its alpha is ………..……………………… %.

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