You invest 50% of your money in IBM stock and 50% of your money in Microsoft stock. The volatilities of returns on IBM and Microsoft stocks are 8% and 12%, respectively. If the correlation between IBM and Microsoft's stock returns is 0.7, what is the volatility of return on your investment? 9.25% 7.21% 6.98% 8.99%

You invest 50% of your money in IBM stock and 50% of your money in Microsoft stock. The volatilities of returns on IBM and Microsoft stocks are 8% and 12%, respectively. If the correlation between IBM and Microsoft's stock returns is 0.7, what is the volatility of return on your investment? 9.25% 7.21% 6.98% 8.99%

PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)

6th Edition

ISBN:9781337117005

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 4FPE

See similar textbooks

Similar questions

Return on Common Stock You buy a share of The Ludwig Corporation stock for $21.40. You expect it to pay dividends of $1.07, $1.1449, and $1.2250 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $26.22 at the end of 3 years. Calculate the growth rate in dividends. Calculate the expected dividend yield. Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to obtain the expected total rate of return. What is this stock’s expected total rate of return (assume the market is in equilibrium with the required return equal to the expected return)?
A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s dividend will grow at a rate of 20% per year for the next 2 years and then at a constant rate of 7% thereafter. The company’s stock has a beta of 1.2, the risk-free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stock’s current price?
Investors are more concerned with future dividends than historical dividends, so go to ESTIMATES and scroll down to the Consensus Estimates on the screen. Click on the Available Measures menu to toggle between earnings per share and dividends per share. How do analysts expect Apple's payout policy to behave in the future?
Start with the partial model in the file Ch07 P27 Build a Model.xlsx on the textbook’s Web site. Hamilton Landscaping’s dividend growth rate is expected to be 30% in the next year, drop to 15% from Year 1 to Year 2, and drop to a constant 5% for Year 2 and all subsequent years. Hamilton has just paid a dividend of $2.50, and its stock has a required return of 11%. What is Hamilton’s estimated stock price today? If you bought the stock at Year 0, what are your expected dividend yield and capital gains for the upcoming year? What are your expected dividend yield and capital gains for the second year (from Year 1 to Year 2)? Why aren’t these the same as for the first year?