(a)
To calculate:
By using a misestimated beta of
Introduction:
Standard deviation is a measure to calculate the deviation from the mean which is also called as a measure of dispersion. It helps in analyzing the performance of the fund.
(b)
To calculate:
By taking the expected market return value of
Introduction:
Standard deviation is a measure to calculate the deviation from the mean which is also called as a measure of dispersion. It helps in analyzing the performance of the fund.
(c)
To calculate:
By taking the data of problem
Introduction:
Standard deviation is a measure to calculate the deviation from the mean which is also called as a measure of dispersion. It helps in analyzing the performance of the fund.
(d)
To determine:
The reason for explaining the fact that the misestimated beta affects more to
Introduction:
Standard deviation is a measure to calculate the deviation from the mean which is also called as a measure of dispersion. It helps in analyzing the performance of the fund.
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Check out a sample textbook solution- Your client has decided that the risk of the bond portfolio is acceptable and wishes to leave it as it is. Now your client has asked you to use historical returns to estimate the standard deviation of Blandy’s stock returns. (Note: Many analysts use 4 to 5 years of monthly returns to estimate risk, and many use 52 weeks of weekly returns; some even use a year or less of daily returns. For the sake of simplicity, use Blandy’s 10 annual returns.)arrow_forwardYour client is shocked at how much risk Blandy stock has and would like to reduce the level of risk. You suggest that the client sell 25% of the Blandy stock and create a portfolio with 75% Blandy stock and 25% in the high-risk Gourmange stock. How do you suppose the client will react to replacing some of the Blandy stock with high-risk stock? Show the client what the proposed portfolio return would have been in each year of the sample. Then calculate the average return and standard deviation using the portfolios annual returns. How does the risk of this two-stock portfolio compare with the risk of the individual stocks if they were held in isolation?arrow_forwardA 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?arrow_forward
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