Returns on stocks X and Y are listed below: Period 1 2 3 4 5 6 7 Stock X -1% -1% 9% 9% 1% -2% 5% Stock Y -3% 4% 12% -4% 5% 4% 5% Consider a portfolio of 20% stock X and 80% stock Y. What is the mean of portfolio returns?
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Returns on stocks X and Y are listed below:
Period 1 2 3 4 5 6 7
Stock X -1% -1% 9% 9% 1% -2% 5%
Stock Y -3% 4% 12% -4% 5% 4% 5%
Consider a portfolio of 20% stock X and 80% stock Y.
What is the mean of portfolio returns?
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- A portfolio has three stocks. Their portfolio weights and expected returns are as follows. Weight E(r) Stock A 0.4 22% Stock B 0.4 4% Stock C 0.2 -18% What is the expected return on the portfolio?What is Stock X's geometric returns if it has the following returns? Year 1 8% Year 2 - 5% Year 3 10% Year 4 - 6% Year 5 15% a. 4.1%. b. 5.2% c. 6.8% d. 8.5%The following questions are based on the given information from table of probabilitydistributions of returns on investment individual shares and portfolio below:Table 3: Probability distributions of returns on investment for individual shares and portfolio. State ofEconomy Probabilityof theStates Return onShare A(rA) Return onShare B(rB) Return on Portfolio AB(rAB)1 0.20 15% -5% 5%2 0.20 -5% 15% 5%3 0.20 5% 25% 15%4 0.20 35% 5% 20%5 0.20 25% 35% 30% Given: By using the above information, demonstrate the rate of risk (variance and standarddeviation) for each of:(i) Share A (ii) Share B (iii) Portfolio A and B
- Suppose securities A, B, and C have the following expected return and risk. Stock Expected return Risk A 8% 6% B 7% 9% C 13% 9% What is the coefficient of variation for stock A?2. Consider stocks A and B with the following monthly returns: Stock 1 2 3 4 A -2% 3% 1% 6% 4% B 1% -2% 4% 5% 3% a. What is the expected return and risk of a portfolio composed of 30% A and 70% B? b. What is the contribution of each stock to portfolio's return and risk? c. What is the structure of the minimum risk portfolio? Compute its expected return and risk.Question 1 Suppose you have the following expectations about the market condition and the returns on Stocks X and Y. Market Condition Probability Return on Stock X Return on Stock Y Bear Market 0.3 -3% -5% Normal Market 0.5 3% 5% Bull Market 0.2 8% 15% a) What are the expected returns for Stocks X and Y, E(rX) and E(rY)? b) What are the standard deviations of the returns for Stocks X and Y, σX and σY?
- Following is information for two stocks: Investment r σ Stock X 8% 10% Stock Y 24% 36% Which stock has the greater relative risk? (show the computation of the relative risk for X & Y.)Suppose we have the following information: Securit Amount Invested Expected Return Beta Stock A RM1 ,OOO 8% 0.80 Stock B RM2,OOO 12% 0.95 Stock C RM3,OOO 15% 1.10 Stock D RM4,OOO 18% a) Compute the expected return on this portfolio. b) Calculate the beta of the portfolio. c) Does this portfolio have more or less systematic risk than an average asset? Explain.The table below shows the expected rates of return for three stocks and their weight in some portfolio: Stock A Stock B Stock C Expected return 0.08 0.03 0.14 Weight 0.4 0.2 0.4 What is the expected portfolio return?
- What is the beta of a portfolio comprised of the following securities? Stock Amount Invested Security Beta- 0.86 1.76 1.35 A B C $3600 $ 2800 $ 9000 Beta of portfolio to 2 decimal places is Numeric ResponseAssume the risk-free rate is r = 3%. Consider the data in the table below: Stock Expected Return Volatility Stock 1 15% 40% Stock 2 7% 30% acompute (c) Determine the tangent portfolios & their respective mean returns and volatilitiesA portfolio consists of two stocks: Stock Expected Return Standard Deviation Weight Stock 1 10% 15% 0.30 Stock 2 13% 20% ??? The correlation between the two stocks’ return is 0.50 (a) Calculate the expected return and standard deviation of the portfolio. Expected Return: Standard Deviation: b) (i) Briefly explain, in general, when there would be “benefits of diversification” (for any portfolio of two securities). (ii) Describe whether the above portfolio would exhibit “benefits of diversification” (and why). [No calculations are required.] (c) Show your calculations re: whether the above portfolio exhibits “benefits of diversification”and indicate whether it does/doesn’t (and why).
