Question

security proportion portfolio expected return standard deviation

A 50% 15% 18%

B 50% 24% 24%

correlation coefficient 0.35

Calculate a) i. Expected return of each portfolio ii. Standard deviation of each portfolio

b. advice management on which portfolio to invest in

Answer #1

Suppose the characteristics of security A and B are given as
follow:
Expected return Standard deviation Stock A 12% 8% Stock B 18%
15%
Correlation coefficient between return of stock A and B is
0.5.
What is the expected value and standard deviation of return of
minimum variance portfolio constructed from stock A and B?

You have a portfolio with a standard deviation of 26% and an
expected return of 18%.
You are considering adding one of the two stocks in the
following table. If after adding the stock you will have 20% of
your money in the new stock and 80% of your money in your existing?
portfolio, which one should you? add?
expected return
standard deviation
correlation with your portfolios return
stock a
13%
24%
0.4
stock b
13%
17%
0.6
Standard deviation...

Following information is available about two securities which
constitute a portfolio:
Security
Expected return Std. deviation%
A 14% 40
B 18% 20
Correlation coefficient (A,B) is -0.45. The portfolio consists
of 40% of A and 60% of B. Find out the expected returns and
standard deviation of the portfolio.

If you have one security with an expected return of 7% and a
standard deviation of 2% and a second security with an expected
return of 13% and a standard deviation of 2.4%, what would be the
standard deviation of a portfolio that consists of 30% of the first
security and 70% of this second security if the correlation
coefficient between the two securities is -.30?

Given the following
information:
Expected return on Stock A
.15 (15%)
Standard deviation of return
0.3
Expected return on Stock B
.18 (18%)
Standard deviation of return
0.4
Correlation coefficient of the returns
on Stock A and Stock B
0.75
a. What are the expected returns and
standard deviations of the following
portfolios?
1. 100 percent of funds invested in
Stock A
2. 100 percent of funds invested in Stock B
3. 50 percent of funds invested in each stock?

Settings Assume the standard deviation of security A is 0.24 and
the standard deviation of security B is 0.35. The correlation
coefficient between A and B is 0.41. What is the standard deviation
of a portfolio composed of 56 % security A and 44 % security B?
The standard deviation of the portfolio is nothing%. (Round to
two decimal places.)

35. Assume the expected return on the market portfolio is 15%
and its standard deviation is 12%. The risk-free rate is 5%. Denote
the expected return and beta of securities on the Security Market
Line
(SML) with () and β, respectively. Which statement is
TRUE?
A) The beta of a CML portfolio that contain 150% of the market
portfolio and 50% borrowed money
is 1.25.
B) The SML can be represented by the following equation:
C) The slope of the...

The expected return and standard deviation of a portfolio that
is 50 percent invested in 3 Doors, Inc., and 50 percent invested in
Down Co. are the following:
3 Doors, Inc.
Down Co.
Expected return, E(R)
19
%
14
%
Standard deviation, σ
62
24
What is the standard deviation if the correlation is +1? 0? −1?
(Do not round intermediate calculations. Enter your answer
as a percent rounded to 2 decimal places. )

Stock A has an expected return of 18% and a standard deviation
of 33%. Stock B has an expected return of 13% and a standard
deviation of 17%. The risk-free rate is 3.6% and the correlation
between Stock A and Stock B is 0.2. Build the optimal risky
portfolio of Stock A and Stock B. What is the standard deviation of
this portfolio?

Suppose Stock X offers the return of 15% with a standard
deviation of 12%; Stock Y offers the return of 24% with a standard
deviation of 26%. These two stocks have the correlation coefficient
of 0.2. If you invest 60% in stock X and the rest in Stock Y, what
is your portfolio return? What is your portfolio standard
deviation

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