Question

Q1) A stock fund has an expected return of 15% and a standard deviation of 25% and a bond fund has an expected return of 10% and a standard deviation of 10%. The correlation between the two funds is 0.25. The risk free rate is 5%. What is the (a) expected return and (b) standard deviation of the portfolio with 70% weight in the stock portfolio and 30% weight in the bond portfolio?

Q2) The variance of Stock A is .004, the variance of the market is .007 and the covariance between the two is .0026. What is the correlation coefficient between the two?

Q3) Road Rollers Paving Company is considering buying a new asphalt laying machine. The machine costs $1,300,000 and can be depreciated to zero on a straight-line basis over its life of 10 years. The machine is expected to have no salvage value. Revenues are expected to be $600,000 per year, and costs are estimated at $220,000 per year. The firm is in the 34% tax bracket. What are the annual operating cash flows for each year? (Note that since the operating cash flows will be the same every year, you just have to calculate the operating cash flow for any one year)

Q4) The variance of Stock A is .004, the variance of the market is .007 and the covariance between the two is .0026. What is beta of the stock?

Answer #1

**Answer to Question 1**

**Answer to Question 2**

The variance of Stock = 0.004

The variance of Market = 0.007

Co-variance = 0.0026

Correlation Coefficient = =(0.0026)/((0.004^(1/2))*(0.007^(1/2))) = 0.4914

**(Hey, Hope you understand the question. I can solve
a maximum of 1 Question, but I have solved the first
question)**

A stock fund has an expected return of 15% and a standard
deviation of 25% and a bond fund has an expected return of 10% and
a standard deviation of 10%. The correlation between the two funds
is 0.25. The risk free rate is 5%. What is the (a) expected return
and (b) standard deviation of the portfolio with 70% weight in the
stock portfolio and 30% weight in the bond portfolio?

A stock fund has a standard deviation of 20% and a bond fund has
a standard deviation of 8%. The correlation of the two funds is
0.11
#1) What is the weight of the stock fund in the
minimum variance portfolio?
#2) What is the standard deviation of this minimum variance
portfolio?
#1. weight of stock fund = 1.25%
#1. weight of stock fund = 10.82%
#1. weight of stock fund = 24.21%
#2. standard deviation of minimum-variance portfolio = 7.68%...

A stock fund has a standard deviation of 20% and a bond fund has
a standard deviation of 8%. The correlation of the two funds is
0.11
#1) What is the weight of the stock fund in the minimum variance
portfolio?
#2) What is the standard deviation of this minimum variance
portfolio?

You have a stock fund with an expected return of 12% and a
standard deviation of 22%, a corporate bond fund with an expected
return of 6% and a standard deviation of 18% and the risk free rate
is 4%. The correlation between the stock and bond funds is 0.15.
What is the expected return of the optimal portfolio? Answer in
percentage, with one decimal place. Answer:

Stock 1 has a expected return of 14% and a standard deviation
of 12%.
Stock 2 has a expected return of 11% and a standard deviation
of 11%.
Correlation between the two stocks is 0.5.
Create a minimum variance portfolio with long positions in both
stocks.
What is the return on this portfolio?

Consider two stocks, Stock D with an expected return of 11
percent and a standard deviation of 26 percent and Stock I, an
international company, with an expected return of 9 percent and a
standard deviation of 19 percent. The correlation between the two
stocks is -.12. What is the weight of each stock in the minimum
variance portfolio? (Round your answer to 4 decimal places.) Weight
of Stock D Weight of Stock I

The stock of Bruin, Inc., has an expected return of 22 percent
and a standard deviation of 37 percent. The stock of Wildcat Co.
has an expected return of 12 percent and a standard deviation of 52
percent. The correlation between the two stocks is .49. Calculate
the expected return and standard deviation of the minimum variance
portfolio.

Create a portfolio using the four stocks and information
below:
Expected Return
Standard Deviation
Weight in Portfolio
Stock A
21.00%
16.00%
17.00%
Stock B
34.00%
33.00%
22.00%
Stock C
33.00%
21.00%
16.00%
Stock D
27.00%
27.00%
45.00%
----------------------
----------------------
----------------------
----------------------
Correlation (A,B)
0.4400
----------------------
----------------------
Correlation (A,C)
0.3300
----------------------
----------------------
Correlation (A,D)
0.9400
----------------------
----------------------
Correlation (B,C)
0.7000
----------------------
----------------------
Correlation (B,D)
0.0200
----------------------
----------------------
Correlation (C,D)
0.6400
----------------------
----------------------
all answered right exept the last two
(Do not...

Given the following information:
Expected return of Stock A
.12 (12%)
Standard Deviation of A's Return
1
Expected return on stock B
.2 (20%)
Standard Deviation of B's return
6
Correlation Coefficient of the returns on stock A & stock
B
-.6 (this is not the covariance, it is the CC)
If as an investor I chose to invest 75% of my funds into stock
A, and 25% into stock B, what is the measure of my coefficient of
variation...

A pension fund manager is considering three mutual funds. The
first is a stock fund, the second is a long-term government and
corporate bond fund, and the third is a T-bill money market fund
that yields a rate of 8%. The probability distribution of the risky
funds is as follows:
Expected Return
Standard Deviation
Stock fund (S)
18
%
35
%
Bond fund (B)
15
20
The correlation between the fund returns is 0.12.
What are the investment proportions in...

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