Suppose you can form portfolios using onlytwo stocks. Stock H and stock M, with thefollowing characteristics: Erh) = 17%, E(TM) =12%, PHM 0.2, H = 30%, om = 20% Find theportfolio weight on stock H that gives you atwo-stock portfolio that has a standarddeviation of 15% (Make sure that you invest inan efficient portfolio).

Portfolio standard deviation is calculated by solving the following Equation: σ port folio =…

uppose you can form portfollos using only two stocks. Stock H and stock M, with the following characteristics: Erh) = 17%, E(TM) : 12%, PHM O.2, H = 30%, om = portfolio weight on stock H that gives you a two-stock portfolio that has a standard deviation of 15% (Make sure that you invest in an efficient portfolio). %3D 20% Find the

uppose you can form portfollos using only two stocks. Stock H and stock M, with the following characteristics: Erh) = 17%, E(TM) : 12%, PHM O.2, H = 30%, om = portfolio weight on stock H that gives you a two-stock portfolio that has a standard deviation of 15% (Make sure that you invest in an efficient portfolio). %3D 20% Find the

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 25P

See similar textbooks

Similar questions

An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?
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?
Consider information given in the table below and answers the question asked thereafter: State Probability return on stock A Return on stock B A 0.15 10% 9% B 0.15 6% 15% C 0.10 20% 10% D 0.18 5% -8% E 0.12 -10% 20% F 0.30 8% 5% Calculate covariance and coefficient of correlation between the returns of thestocks A and B.v. Now suppose you have $100,000 to invest and you want to a hold a portfoliocomprising of $45,000 invested in stock A and remaining amount in stock B.Calculate risk and return of your portfolio.
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 2.5% + 0.60RM + eA RB = –1.5% + 0.70RM + eB σM = 19%; R-squareA = 0.24; R-squareB = 0.18 Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P, 0.35 in the market index, and 0.25 in T-bill. Portfolio P is composed of 70% Stock A and 30% Stock B. What is the covariance between the portfolio and the market index? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.)
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 2.5% + 0.60RM + eA RB = –1.5% + 0.70RM + eB σM = 19%; R-squareA = 0.24; R-squareB = 0.18 Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P, 0.35 in the market index, and 0.25 in T-bill. Portfolio P is composed of 70% Stock A and 30% Stock B. a. What is the standard deviation of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What is the "firm-specific" risk of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.) d. What is the covariance between the portfolio and the market index? (Calculate using…
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.50% + 0.65RM + eA RB = -1.60% + 0.80RM + eB σM = 21%; R-squareA = 0.22; R-squareB = 0.14 Assume you create a portfolio Q, with investment proportions of 0.50 in a risky portfolio P, 0.30 in the market index, and 0.20 in T-bill. Portfolio P is composed of 60% Stock A and 40% Stock B. Required: What is the standard deviation of portfolio Q?
The following shows beta for several companies. Calculate each stock’s expected rate ofreturn using CAPM, assuming the risk free rate is 4% and the risk premium for the marketportfolio is 7%. What is your portfolio beta if you construct an equally weighted portfolio using allstocks? What can you say about this portfolio relative to the market?Stock BetaApple 1.35Johnson & Johnson 0.69IBM 1.10
Consider a portfolio consisting of the three risky stocks. You decide to invest 25 percent in Apple, 35 percent in HP and 40 percent in Spree. These stocks show the volatility at the level of 11.15 percent, 24.4 percent and 15.29 percent, and the correlation with the market portfolio at the level of 0.65, 0.83 and 0.36, respectively. Calculate the expected portfolio return using CAPM if the market portfolio shows the expected return of 12.88 percent and its volatility is 10.05 percent. The risk-free rate of return is 3.31 percent. Please make sure your answer is correct tutor. Out of my questions in Bartleby, 90% are wrong all the time. Which is resulting also to my low grades. Don't get it if you don't know the answer. Please use TEXT. not snip or handwriting. Thank you
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% + 0.70RM + eB σM = 17%; R-squareA = 0.26; R-squareB = 0.18 Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P, 0.35 in the market index, and 0.25 in T-bill. Portfolio P is composed of 70% Stock A and 30% Stock B. What is the beta of portfolio Q? (Do not round intermediate calculations. Round your answer to 2 decimal places.) What is the "firm-specific" risk of portfolio Q? (Calculate using numbers in decimal form, not percentages. Do not round intermediate calculations. Round your answer to 4 decimal places.)
Consider a portfolio consisting of the following three stocks: The volatility of the market portfolio isCorrelation withPortfolio weight Volatility the Market PortfolioHEC Corp 0.26 13% 0.35Green Midget 0.29 28% 0.52Alive And Well 0.45 11% 0.5410% and it has an expected return of 8%. The risk-free rate is 3%.1. Compute the beta and expected return of each stock.2. Using your answer from question (1), calculate the expected return of the portfolio.3. What is the beta of the portfolio?
Assume you wish to hold a portfolio consisting of Loblaw stock and a riskless asset. Given the following information, calculate portfolio expected returns and portfolio betas, letting the proportion of funds invested in Loblaw range from 0 to 125% Loblaw has a beta (\ beta) of 1.2 and an expected return of 18% Risk-free rate is 7%. Loblaw weights: 0%, 25%, 50%, 75%, 100%
You have a portfolio that is 33 percent invested in Stock R, 17 percent invested in Stock S, with the remainder in Stock T. The expected return on these stocks is 9.4 percent, 10.8 percent, and 13.1 percent, respectively. What is the expected return on the portfolio? Multiple Choice 11.10% 11.29% 11.49% 12.05% 10.18%