EBK MINDTAP FOR KELLER'S STATISTICS FOR
11th Edition
ISBN: 9780357110676
Author: KELLER
Publisher: VST
expand_more
expand_more
format_list_bulleted
Question
Chapter 7.3, Problem 72E
(a)
To determine
Calculate expected value and standard deviation when the coefficient of correlation
(b)
To determine
Calculate standard deviation when the coefficient of correlation is equal to 0.02.
(c)
To determine
Calculate standard deviation when the coefficient of correlation is equal to zero.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Given the following information, what is the standard deviation of the returns on a portfolio that is invested 35 percent in both Stocks A and C, and 30 percent in Stock B? (see attached chart)
Suppose one uses the single-index model to estimate characteristics of securities.Which of the following statements is correct?
(a)The covariances between securities are the same as in the data.
(b)The variance of a portfolio is the same as in the data.
(c)The expected return and the variance of a security are the same as in the data.
(d)The expected return,variance and covariances of a security are the same as in the da
Question 11
The beta of an active portfolio is 1.45. The standard deviation of the returns on the market index
is 22%. The nonsystematic variance of the active portfolio is 3%. The standard deviation of the
returns on the active portfolio is
a) 36.30%.
b) 5.84%.
c) 19.60%.
d) 24.17%.
e) 26.0%.
Chapter 7 Solutions
EBK MINDTAP FOR KELLER'S STATISTICS FOR
Ch. 7.1 - Prob. 1ECh. 7.1 - Prob. 2ECh. 7.1 - Prob. 3ECh. 7.1 - Prob. 4ECh. 7.1 - Prob. 5ECh. 7.1 - Prob. 6ECh. 7.1 - Prob. 7ECh. 7.1 - Prob. 8ECh. 7.1 - Prob. 9ECh. 7.1 - Prob. 10E
Ch. 7.1 - Prob. 11ECh. 7.1 - Prob. 12ECh. 7.1 - Prob. 13ECh. 7.1 - Prob. 14ECh. 7.1 - Prob. 15ECh. 7.1 - Prob. 16ECh. 7.1 - Prob. 17ECh. 7.1 - Prob. 18ECh. 7.1 - Prob. 19ECh. 7.1 - Prob. 20ECh. 7.1 - Prob. 21ECh. 7.1 - Prob. 22ECh. 7.1 - Prob. 23ECh. 7.1 - Prob. 24ECh. 7.1 - Prob. 25ECh. 7.1 - Prob. 26ECh. 7.1 - Prob. 27ECh. 7.1 - Prob. 28ECh. 7.1 - Prob. 29ECh. 7.1 - Prob. 30ECh. 7.1 - Prob. 31ECh. 7.1 - Prob. 32ECh. 7.1 - Prob. 33ECh. 7.1 - Prob. 34ECh. 7.1 - Prob. 35ECh. 7.1 - Prob. 36ECh. 7.1 - Prob. 37ECh. 7.1 - Prob. 38ECh. 7.1 - Prob. 39ECh. 7.1 - Prob. 40ECh. 7.1 - Prob. 41ECh. 7.1 - Prob. 42ECh. 7.1 - Prob. 43ECh. 7.1 - Prob. 44ECh. 7.2 - Prob. 45ECh. 7.2 - Prob. 46ECh. 7.2 - Prob. 47ECh. 7.2 - Prob. 48ECh. 7.2 - Prob. 49ECh. 7.2 - Prob. 50ECh. 7.2 - Prob. 51ECh. 7.2 - Prob. 52ECh. 7.2 - Prob. 53ECh. 7.2 - Prob. 54ECh. 7.2 - Prob. 55ECh. 7.2 - Prob. 56ECh. 7.2 - Canadians who visit the United Sates often buy...Ch. 7.2 - Prob. 58ECh. 7.2 - Prob. 59ECh. 7.2 - Prob. 60ECh. 7.2 - Prob. 61ECh. 7.2 - Prob. 62ECh. 7.2 - Prob. 63ECh. 7.2 - Prob. 64ECh. 7.2 - Prob. 65ECh. 7.2 - Prob. 66ECh. 7.2 - Prob. 67ECh. 7.2 - Prob. 68ECh. 7.2 - Prob. 69ECh. 7.2 - Prob. 70ECh. 7.3 - Prob. 71ECh. 7.3 - Prob. 72ECh. 7.3 - Prob. 73ECh. 7.3 - Prob. 74ECh. 7.3 - Prob. 75ECh. 7.3 - Prob. 76ECh. 7.3 - Prob. 77ECh. 7.3 - Prob. 78ECh. 7.3 - Prob. 79ECh. 7.3 - Prob. 80ECh. 7.3 - Prob. 81ECh. 7.3 - Prob. 82ECh. 7.3 - Prob. 84ECh. 7.3 - Prob. 85ECh. 7.3 - Prob. 86ECh. 7.3 - Prob. 87ECh. 7.3 - Prob. 88ECh. 7.3 - Prob. 89ECh. 7.3 - Prob. 90ECh. 7.3 - Prob. 91ECh. 7.3 - Prob. 93ECh. 7.3 - Prob. 94ECh. 7.3 - Prob. 95ECh. 7.3 - Prob. 96ECh. 7.3 - Prob. 97ECh. 7.3 - Prob. 99ECh. 7.4 - Prob. 100ECh. 7.4 - Prob. 101ECh. 7.4 - Prob. 102ECh. 7.4 - Prob. 103ECh. 7.4 - Prob. 104ECh. 7.4 - Prob. 105ECh. 7.4 - Prob. 106ECh. 7.4 - Prob. 107ECh. 7.4 - Prob. 108ECh. 7.4 - Prob. 110ECh. 7.4 - Prob. 112ECh. 7.4 - Prob. 113ECh. 7.4 - Prob. 114ECh. 7.4 - Prob. 115ECh. 7.4 - Prob. 116ECh. 7.4 - Prob. 117ECh. 7.4 - Prob. 118ECh. 7.4 - Prob. 119ECh. 7.4 - Prob. 120ECh. 7.4 - Prob. 121ECh. 7.4 - Prob. 122ECh. 7.4 - Prob. 123ECh. 7.4 - Prob. 124ECh. 7.4 - Prob. 125ECh. 7.4 - Prob. 126ECh. 7.4 - Prob. 127ECh. 7.5 - Prob. 128ECh. 7.5 - Prob. 129ECh. 7.5 - Prob. 130ECh. 7.5 - Prob. 131ECh. 7.5 - Prob. 132ECh. 7.5 - Prob. 133ECh. 7.5 - Prob. 134ECh. 7.5 - Prob. 135ECh. 7.5 - Prob. 136ECh. 7.5 - Prob. 137ECh. 7.5 - Prob. 138ECh. 7.5 - Prob. 139ECh. 7.5 - Prob. 140ECh. 7.5 - Prob. 141ECh. 7.5 - Prob. 142ECh. 7.5 - Prob. 143ECh. 7.5 - Prob. 144ECh. 7 - Prob. 145CECh. 7 - Prob. 146CECh. 7 - Prob. 147CECh. 7 - Prob. 148CECh. 7 - Prob. 149CECh. 7 - Prob. 150CECh. 7 - Prob. 151CECh. 7 - Prob. 152CECh. 7 - Prob. 153CECh. 7 - Prob. 154CECh. 7 - Prob. 155CECh. 7 - Prob. 156CECh. 7 - Prob. 157CECh. 7 - Prob. 158CECh. 7 - Prob. 159CECh. 7 - Prob. 160CECh. 7 - Prob. 161CECh. 7 - Prob. 162CECh. 7 - Prob. 163CECh. 7 - Prob. 164CECh. 7 - Prob. 165CECh. 7 - Prob. 166CECh. 7 - Prob. 167CECh. 7 - Prob. 168CECh. 7 - Prob. 169CECh. 7 - Prob. 170CE
Knowledge Booster
Similar questions
- If investors want portfolios with small risk, should they look for investments that have positive covariance, have negative covariance, or are uncorrelated? Does a portfolio formed from the mix of three investments have more risk than a portfolio formed from two?arrow_forwardYou plan to invest $1,000 in a corporate bond fund or in a common stock fund. The following table represents the annual return (per $1,000) of each of these investments under various economic conditions and the probability that each of those economic conditions will occur. Compute the expected return for the corporate bond and for the common stock fund. Show your calculations on excel for expected returns. Compute the standard deviation for the corporate bond fund and for the common stock fund. Would you invest in the corporate bond fund or the common stock fund? Explain. If choose to invest in the common stock fund and in (c), what do you think about the possibility of losing $999 of every $1,000 invested if there is depression. Explain.arrow_forwardSuppose you visit with a financial adviser, and you are considering investing some of your wealth in one of three investment portfolios stocks, bonds, or commodities. Your financial adviser provides you with the following table, which gives the probabilities of possible returns from each investment To maximize your expected return, you should choose: Stocks Bonds Probability Return Probability Return 0.15 20% 0.15 16.7% 06 10% T 04 7.5% 0.25 8% 0.45 3.3% OA bonds OB stocks OC. commodities OD. All of the portfolios have the same expected return. If you are risk-averse and had to choose between the stock or the bond investments, you would choose OA the stock portfolio because there is less uncertainty over the outcome OB. the bond portfolio because there is less uncertainty over the outcome. OC. the stock portfolio because of greater expected return. OD. the bond portfolio because of greater expected return. Commodities Probability Return 02 20% 0.2 15% 0.2 8% 02 02 5% 0%arrow_forward
- QUESTION 1 Elizabeth has decided to form a portfolio by putting 30% of her money into stock 1 and 70% into stock 2. She assumes that the expected returns will be 10% and 18%, respectively, and that the standard deviations will be 15% and 24%, respectively. Compute the standard deviation of the returns on the portfolio assuming that the two stocks' returns are uncorrelated. 17.4%. 27.4%. 7.4%. 11.4%. QUESTION 2 Elizabeth has decided to form a portfolio by putting 30% of her money into stock 1 and 70% into stock 2. She assumes that the expected returns will be 10% and 18%, respectively, and that the standard deviations will be 15% and 24%, respectively. Describe what happens to the standard deviation of the portfolio returns when the coefficient of correlation ρ decreases. The standard deviation of the portfolio returns decreases as the coefficient of correlation decreases. The standard deviation of the portfolio returns increases as the coefficient…arrow_forwardQUESTION 2 Elizabeth has decided to form a portfolio by putting 30% of her money into stock 1 and 70% into stock 2. She assumes that the expected returns will be 10% and 18%, respectively, and that the standard deviations will be 15% and 24%, respectively. Describe what happens to the standard deviation of the portfolio returns when the coefficient of correlation ρ decreases. The standard deviation of the portfolio returns decreases as the coefficient of correlation decreases. The standard deviation of the portfolio returns increases as the coefficient of correlation increases. The standard deviation of the portfolio returns decreases as the coefficient of correlation increases. The standard deviation of the portfolio returns increases as the coefficient of correlation decreases.arrow_forwardThe beta of an active portfolio is 1.45. The standard deviation of the returns on the market inde is 22%. The nonsystematic variance of the active portfolio is 3%. The standard deviation of the returns on the active portfolio is a) 36.30%. b) 5.84%. c) 19.60%. d) 24.17%. e) 26.0%.arrow_forward
- (a) Calculate the risk-premium on this portfolio and provide a brief interpretation of it (b) Calculate the minimum sale price of the capital assets for the average investor.arrow_forward8. Risk and return Suppose Frances is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds. Combination A B с D E Fraction of Portfolio in Diversified Stocks (Percent) 0 25 50 75 100 Average Annual Return (Percent) 2.00 4.50 7.00 9.50 12.00 As the risk of Frances's portfolio increases, the average annual return on her portfolio Standard Deviation of Portfolio Return (Risk) (Percent) 0 Accept more risk Sell some of her bonds and use the proceeds to purchase stocks Sell some of her stocks and place the proceeds in a savings account Sell some of her stocks and use the proceeds to purchase bonds 5 10 15 20 Suppose Frances currently allocates 25% of her portfolio to a diversified group of stocks and 75% of her portfolio to risk-free bonds; that is, she chooses combination B. She wants to increase the average…arrow_forwardStock X has a 9.5% expected return, a beta coefficient of 0.8, and a 30% standard deviation of expected returns. Stock Y has a 12.0% expected return, a beta coefficient of 1.1, and a 30.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. Calculate the required return of a portfolio that has $7,500 invested in Stock X and $5,500 invested in Stock Y. Do not round intermediate calculations. Round your answer to two decimal places. rp = %arrow_forward
- The risk free rate is 3%. The optimal risky portfolio has an expected return of 9% and standard deviation of 20%. Answer the following questions. Assume the utility function of an investor is U = E(r) − 0.5Aσ2. What is condition of A to make the investors prefer the optimal risky portfolio than the risk free asset?arrow_forwardTwo stocks are available. The corresponding expectedrates of return are r¯1 and r¯2; the corresponding variances and covariances areσ12, σ22, and σ12. What percentages of total investment should be invested ineach of the two stocks to minimize the total variance of the rate of return ofthe resulting portfolio? What is the mean rate of return of this portfolio?arrow_forwardSuppose the expected return on the tangent portfolio is 12% and its volatility is 30%.The risk-free rate is 3%.(a) What is the equation of the Capital Market Line (CML)?(b) What is the standard deviation of an efficient portfolio whose expected return of16.5%? How would you allocate $3,000 to achieve this positionarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning