Using Table 5.3 as your guide, what is your estimate of the expected annual HPR on the market index stock portfolio if the current risk-free interest rate is 3%? (Round your answer to 2 decimal places.) Expected annual HPR %
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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?Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an expected return of 18% and a standard deviation of 60%. The correlation coefficient between Stocks A and B is 0.2. What are the expected return and standard deviation of a portfolio invested 30% in Stock A and 70% in Stock B?What is the expected return for the following portfolio? (State your answer in percent with two decimal places.) Stock Expected returns Investment AAA 35% $500,000 BBB 29% $1,300,000 CCC 18% $1,200,000 DDD 7% $1,500,000 O.17.13% O.19.40% O.21.01% O.22.21% O.23.88%
- Roundall dollar answers to 2 decimal places and record all interest rate, coupon rate and growth rate answers as a percentrounded to one decimal place 40. If the expected return on the market portfolio (i.e., Rm) is 18%, if the risk-free rate (i.e., Rf) is 8% and if thebeta of Homton, Inc. stock is 1.75, what is the equilibrium expected rate of return on Homton’s stockaccording to the Capital Asset Pricing Model (CAPM)? (Record your answer rounded to 1 decimal place; forexample, record 18.29654% as 18.3).41. If the beta of Braxton, Inc. stock is 1.51, the risk-free rate (Rf) is 3.5%, and the market risk premium is 4.8%,what is the equilibrium expected rate of return on Braxton’s stock according to the Capital Asset PricingModel (CAPM)? (Record your answer rounded to 1 decimal place; for example, record 18.29654% as 18.3)An analyst wants to evaluate Portfolio X, consisting entirely of U.S. common stocks, using both the Treynor and Sharpe measures of portfolio performance. The following table provides the average annual rate of return for Portfolio X, the market portfolio (as measured by the Standard and Poor’s 500 Index), and U.S. Treasury bills (T-bills) during the past eight years. Rate Annual Averageof Return STANDARD DEVIATION OF RETURN BETA Portfolio X 10 13 0.40 S&P 500 12 10 1.00 T-bills 7 n/a n/a n/a = not applicable Calculate both the Treynor measure and the Sharpe measure for both Portfolio X and the S&P 500. Round your answers for the Treynor measure to one decimal place and for the Sharpe measure to three decimal places. Treynor measure Sharpe measure Portfolio X 7.5 S&P 500 5Currently, the risk-free return is 2 percent, and the expected market rate of return is 11 percent. What is the expected return of the following three-stock portfolio? Do not round intermediate calculations. Round your answer to two decimal places. Investment Beta $ 200,000 1.0 100,000 0.1 700,000 2.9 %
- Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 38% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 5%. Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index with weights as shown below. (Enter your answers as decimals rounded to 4 places. Leave no cells blank - be certain to enter "0" wherever required.) WBills: WIndex: Expected Return: Variance: 0.0 1.0 0.1300 0.1444 Example 0.2 0.8 0.4 0.6 0.6 0.4 0.8 0.2 1.0 0.02-11 We have the following information on a portfolio consisting of Stocks A, B, and C: A B C Expectd annual return 25% 20% 15% Standard Deviation of Return 35% 30% 25% Price per share 100 85 75 # shares 100,000 150,000 200,000 correlation coefficient (A,B) 0.5 correlation coefficient (A,C) 0.2 correlation coefficient (B,C) .8 number of days per year 365…2-9 We have the following information on a portfolio consisting of Stocks A, B, and C: A B C Expectd annual return 25% 20% 15% Standard Deviation of Return 35% 30% 25% Price per share 100 85 75 # shares 100,000 150,000 200,000 correlation coefficient (A,B) 0.5 correlation coefficient (A,C) 0.2 correlation coefficient (B,C) .8 number of days per year 365 What…
