Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Following is information for the required returns and standard deviations of returns for A, B, and C. The correlation coefficients for each pair also are shown below in a matrix. Which is the portfolio you will recommend AB, AC, or BC, and why?
A
B
C
Required Rate of return
7%
10%
20%
Standard Deviation
33%
54%
90%
Coefficient A,B
0.16
Coefficient A,C
0.19
Coefficient B,C
0.17
Consider the following information for four portfolios, the market, and the risk-free rate (RFR):
Portfolio
Return
Beta
SD
A1
0.15
1.25
0.182
A2
0.1
0.9
0.223
A3
0.12
1.1
0.138
A4
0.08
0.8
0.125
Market
0.11
1
0.2
RFR
0.03
0
0
Refer to Exhibit 18.6. Calculate the Jensen alpha Measure for each portfolio.
a. A1 = 0.014, A2 = -0.002, A3 = 0.002, A4 = -0.02
b. A1 = 0.002, A2 = -0.02, A3 = 0.002, A4 = -0.014
c. A1 = 0.02, A2 = -0.002, A3 = 0.002, A4 = -0.014
d. A1 = 0.03, A2 = -0.002, A3 = 0.02, A4 = -0.14
e. A1 = 0.02, A2 = -0.002, A3 = 0.02, A4 = -0.14
Expected retun and standard deviation. Use the following information to answer the questions:
a. What is the expected return of each asset?
b. What is the variance and the standard deviation
c. What is the expected return of a portfolio with 1 1 Data Table
d. What is the portfolio's variance and standard de
- X
Hint Make sure to round all intermediate calculatio
Swers yo
(Click on the following icon D in order to copy its contents into a spreadsheet.)
a. What is the expected return of asset J?
(Round to four decimal places.)
Return on
Return on
Return on
Probability
of State
State of
Asset J in
Asset Kin
State
0.200
0.140
0.040
Asset L in
Economy
State
State
Вoom
0.28
0.070
0.260
0.180
Growth
0.37
0.25
0.070
Stagnant
0.070
0.060
-0.210
Recession
0.10
0.070
-0.100
Print
Done
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