Refer to the table below: Expected return, E(R) Standard deviation, o Correlation 3 Doors, Inc. 17% 32 Down Co. 7% 16 0.19 Using the information provided on the two stocks in the table above, find the expected return and standard deviation on the minimum variance portfolio. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Expected Return = Standard Deviation =

Refer to the table below: Expected return, E(R) Standard deviation, o Correlation 3 Doors, Inc. 17% 32 Down Co. 7% 16 0.19 Using the information provided on the two stocks in the table above, find the expected return and standard deviation on the minimum variance portfolio. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Expected Return = Standard Deviation =

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 1P: The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market...

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The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market return is 20%. If the correlation between Stock A and the market is 0.70, then what is Stock A’s beta?
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Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA= 4.0% + 0.50RM + eA RB= -1.2% + 0.7RM + eB sigmaM= 17% ; R-squareA = 0.26 ; R-squareB= 0.18 Break down the variance of each stock to the systematic and firm-specific components (write in decimal form, rounded to 4 decimal places). Risk for A Risk for B Systematic Firm-specific
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The following table shows estimates of the risk of two well-known Canadian stocks: Standard Deviation (%) R2raise to the power of 2 Beta Standard Error of Beta Sun Life Financial 25.7 0.19 0.93 0.12 Suncor Energy 26.5 0.02 0.70 0.27 What proportion of each stock’s risk was market risk, and what proportion was specific risk? What is the variance of the returns for Sun Life Financial stock? What is the specific variance? What is the confidence interval on Suncor’s beta? If the CAPM is correct, what is the expected return on Sun Life? Assume a risk-free interest rate of 4% and an expected market return of 14%. Suppose that next year, the market provides a 14% return. Knowing this, what return would you expect from Sun Life?
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CAPM has been estimated for stocks A and B with the following results: RA= 0.01 + 0.8RM+ eA & RB= 0.02 + 1.2RM+ eB. The standard deviations of Market, eA and eB are 0.20, 0.20 and 0.10 respectively. The standard deviation for stock A is __________. a. 0.0676 b. 0.0656 c. 0.2561 d. 0.2600
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The following table shows estimates of the risk of two well-known Canadian stocks: Standard Standard Deviation (%) R2 Beta Error of Beta Sun Life Financial 25.7 0.19 0.95 0.16 Loblaw 30.5 0.01 0.21 0.27 What proportion of each stock’s risk was market risk, and what proportion was specific risk? What is the variance of the returns for Sun Life Financial stock? What is the specific variance? What is the confidence interval on Loblaw's beta? If the CAPM is correct, what is the expected return on Sun Life? Assume a risk-free interest rate of 4% and an expected market return of 13%. Suppose that next year, the market provides a 18% return. Knowing this, what return would you expect from Sun Life?
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