Homework Answers
Weight of each stock in a portfolio
= Value of investment / Total value of the portfolio
= Value of stock A or B or C or D / $8,000
Weighted average return of a portfolio
= Sum of Weight of each stock with their respective returns
= Weight of A x Return of A + Weight of B x Return of B + Weight of C x Return of C + Weight of D x Return of D
The following table shows the calculations
| Calculations | A | B = A / 8,000 | C | D = B x C |
| Stock | Investment | Weight | Return | Weighted Average return |
| Stock A | 1000 | 0.125 | 12% | 1.50% |
| Stock B | 2000 | 0.250 | 15% | 3.75% |
| Stock C | 1000 | 0.125 | 9% | 1.13% |
| Stock D | 4000 | 0.500 | 39% | 19.50% |
| Total | 8000 | 1.000 | 25.88% |
Add Answer to:
3. Weighted average At the beginning of the year, you invested $8,000 in four stocks, but...
a. Using a 40/60 split, what is the weighted average standard deviation of the two stocks?...
a. Using a
40/60 split, what is the weighted average standard deviation of the
two stocks?
b. Recalculate the standard deviation of a
portfolio of the two stocks
c. What is the reduction in standard deviation
that results from the creation of a portfolio of the two
stocks?
WeVest Financial Advisors suggests an investment in two stocks (40% in Stock A and 60% in Stock B). They claim the investment will reduce risk through diversification, but they need proof. This...
98) Which of the following statements is FALSE A) The volatility declines as the number of stocks in a portfolio grows. B) An equally weighted portfolio is a porfolio in which the same amount is...
98) Which of the following statements is FALSE A) The volatility declines as the number of stocks in a portfolio grows. B) An equally weighted portfolio is a porfolio in which the same amount is invested in eadh stock C) As the number of stocks in a portfolio grows large, the variance of the portfolio is determined primarily by the average covariance among the stocks D) When combining stocks into a portfolio that puts positive weight on each stock, unless...
You decide to form a portfolio of the following amounts invested in the following stocks. What...
You decide to form a portfolio of the following amounts invested in the following stocks. What is the beta of the portfolio? Stock Amount Beta Expected Return Exxon $2,000 0.60 9% IBM $3,000 0.95 13% General Motors $1,000 1.15 13% Microsoft $4,000 1.35 14% a) 1.01 c) 12.6 e) 4.05 b) 1.06 d) 51.6
. (Portfolio beta and security market line) You own a portfolio consisting of the following stocks...
. (Portfolio beta and security market line) You own a portfolio consisting of the following stocks The risk-free rate is 4 percent. Also, the expected return on the market portfolio is 9 percent. a. Calculate the expected return of your portfolio (Hint: The expected return of a portfolio equals the weighted average of the individual stocks' expected returns where the weights are the percentage invested in each stock.) b. Calculate the portfolio beta. c. Given the foregoing information, plot the...
You are considering investing in three stocks with the following expected returns: Stock A: 7% Stock...
You are considering investing in three stocks with the following expected returns: Stock A: 7% Stock B: 12% Stock C: 20%. What is the expected return on the portfolio if an equal amount is invested in each stock? What would be the expected return if 50 percent of your funds is invested in stock A and the remaining funds are split evenly between stocks B and C?
WeVest Financial Advisors suggests an investment in two stocks (40% in Stock A and 60% in...
WeVest Financial Advisors suggests an investment in two stocks (40% in Stock A and 60% in Stock B). They claim the investment will reduce risk through diversification, but they need proof. This is the historical returns for the two stocks. Year Returns (%) Stock A Stock B 2012 14.72% 10.36% 2013 15.60% 11.30% 2014 12.69% 10.91% 2015 10.90% 12.26% 2016 11.40% 7.96% a. Using a 40/60 split, what is the weighted average standard deviation of the two stocks? (Enter your...
Stocks A and B have the following historical returns: 1. Calculate the arithmetic average return for each stock. 2. Calculate the standard deviation of returns for each stock. 3. Assume that 50% of y...
Stocks A and B have the following historical returns:
1. Calculate the arithmetic average return for each stock.
2. Calculate the standard deviation of returns for each
stock.
3. Assume that 50% of your portfolio is invested in Stock A and
the rest is invested in Stock B. Based on this information, what is
your portfolio’s realized return?
4. If 50% of your portfolio is invested in Stock A and the rest
is invested in Stock B, what is the...
You own a portfolio that has $1,589 invested in Stock A and $634 invested in Stock B. If the returns on these stocks are...
You own a portfolio that has $1,589 invested in Stock A and $634 invested in Stock B. If the returns on these stocks are 9.89% and 10.67%, respectively, what is the return on the portfolio?
Portfolio P has equal amounts invested in each of the three stocks, A, B, and C....
Portfolio P has equal amounts invested in each of the three stocks, A, B, and C. Stock A has a beta of 0.8, Stock B has a beta of 1.0, and Stock C has a beta of 1.2. Each of the stocks has a standard deviation of 25%. The returns on the three stocks are independent of one another (i.e., the correlation coefficients all equal zero). Assume that there is an increase in the market risk premium, but the risk-free...
Problem 8-02 You are considering investing in three stocks with the following expected returns: Stock A...
Problem 8-02 You are considering investing in three stocks with the following expected returns: Stock A 7 % Stock B 12 Stock C 19 a. What is the expected return on the portfolio if an equal amount is invested in each stock? Round your answer to two decimal places. b. What would be the expected return if 54 percent of your funds is invested in stock A and the remaining funds are split evenly between stocks B and C? Round...
a. Using a
40/60 split, what is the weighted average standard deviation of the
two stocks?
b. Recalculate the standard deviation of a
portfolio of the two stocks
c. What is the reduction in standard deviation
that results from the creation of a portfolio of the two
stocks?
WeVest Financial Advisors suggests an investment in two stocks (40% in Stock A and 60% in Stock B). They claim the investment will reduce risk through diversification, but they need proof. This...
98) Which of the following statements is FALSE A) The volatility declines as the number of stocks in a portfolio grows. B) An equally weighted portfolio is a porfolio in which the same amount is invested in eadh stock C) As the number of stocks in a portfolio grows large, the variance of the portfolio is determined primarily by the average covariance among the stocks D) When combining stocks into a portfolio that puts positive weight on each stock, unless...
. (Portfolio beta and security market line) You own a portfolio consisting of the following stocks The risk-free rate is 4 percent. Also, the expected return on the market portfolio is 9 percent. a. Calculate the expected return of your portfolio (Hint: The expected return of a portfolio equals the weighted average of the individual stocks' expected returns where the weights are the percentage invested in each stock.) b. Calculate the portfolio beta. c. Given the foregoing information, plot the...
Stocks A and B have the following historical returns:
1. Calculate the arithmetic average return for each stock.
2. Calculate the standard deviation of returns for each
stock.
3. Assume that 50% of your portfolio is invested in Stock A and
the rest is invested in Stock B. Based on this information, what is
your portfolio’s realized return?
4. If 50% of your portfolio is invested in Stock A and the rest
is invested in Stock B, what is the...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago