Question

You have calculated that the expected annual return for a stock is 8%. Will this figure be the same as your actual return? Explain

Answer #1

Expected annual return is based on the future Expectations of income of the company. These expectations which give rise to the expected annual return, and not the real figure. If the actual performance of the company outperforms expected performance the actual return can be higher than the expected return. If the actual performance is lower than the expected performance the actual return will be lower than expected return. Hence, the actual return can be different from the expected annual return of 8%.

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doubt.*

A portfolio of $ 100,000 is composed of two assets: A stock
whose expected annual return is 10% with an annual standard
deviation of 20%; A bond whose expected annual return is 5% with an
annual standard deviation of 12%. The coefficient of correlation
between their returns is 0.3. An investor puts 60% in the stock and
40% in bonds.
What is the expected annual return, standard deviation of the
portfolio?
What is the 1-year 95% VaR? Explain in...

You have calculated that Stock XYZ has an expected return of
15.64%, which you found using past historical data as a basis.
Also, you feel there is 30% chance of a boom next year, while there
is a 25% chance of a recession. Over the past 50 years, Stock XYZ
has averaged a return of 16.54% during normal years and 19.29%
during booming years. What did it average during recessionary
years?

8. How are the expected return and risk of a portfolio
calculated?

You have
$61,000.
You put
18%
of your money in a stock with an expected return of
14%,
$34,000
in a stock with an expected return of
17%,
and the rest in a stock with an expected return of
22%.
What is the expected return of your portfolio?

You have $62,000. You put 18% of your money in a stock with an
expected return of 13%, $32,000 in stock with expected return of
15% and the rest in stock with an expected return of 18%. What is
the expected return of your portfolio?

you
have $59,000. You put 21% of your money in a stock with an expected
return of 10%, $38,000 in a stock with an expected return of 17%,
and the rest in stock with an expected return of 22%. What is the
expected return of your portfolio?

ou have $68000. You put 24% of your money in a stock with an
expected return of 13%, $39 000 in a stock with an expected
return of 18%, and the rest in a stock with an expected return of
21%. What is the expected return of your portfolio?

Stock A has an expected return of 8%; stock B has an expected
return of 5%. What is the expected return on a portfolio is
comprised of 50% of Stock A and 50% of Stock B?
5.2 %
7.8 %
6.5 %
6.5 %

. You are considering purchasing stock S. This stock has an
expected return of 8% if the economy booms and 3% if the economy
goes into a recession. The overall expected return will:
A. be equal to one-half of 8% if there is a 50% chance of an
economic boom.
B. vary inversely with the growth of the economy.
C. decrease as the probability of a recession increases.
D. decrease as the probability of a boom economy increases.

You have a two-stock
portfolio. One stock has an expected return of 12% and a standard
deviation of 24%. The other has an expected return of 8% and a
standard deviation of 20%. You invested in these stocks equally
(50% of your investment went toward each of the two stocks). If the
two stocks are negatively correlated, which one of the following is
the most feasible standard deviation of the
portfolio?
25%
22%
18%
not enough information to
determine

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