Question

1. The following table shows rates of return for two stocks.

A | B | C | |

1 | Year | Stock A | Stock B |

2 | 1 | 14% | 13% |

3 | 2 | -15% | -14% |

4 | 3 | -6% | -9% |

5 | 4 | 5% | 28% |

6 | 5 | 14% | 8% |

7 | 6 | 15% | 7% |

a. What is the arithmetic average return for stock B?

b. What is the variance for stock B?

c. What is the covariance of returns?

2. The following table shows realized rates of return for two stocks.

A | B | C | |

1 | Year | Stock A | Stock B |

2 | 1 | -10% | 15% |

3 | 2 | -20% | -14% |

4 | 3 | -6% | -2% |

5 | 4 | 5% | 28% |

6 | 5 | 14% | 8% |

7 | 6 | 19% | 3% |

a. What is the arithmetic average return for stock B?

b. What is the variance for stock B?

c. What is the covariance of returns?

d. What is the correlation coefficient?

3. The return on Samsung stock has a standard deviation of 35% and the return on Toyota stock has a standard deviation of 14%. Their covariance is 0.0196.

a. If you invest 70% in Samsung and 30% in Toyota, what is the variance of the portfolio?

b. What is the standard deviation of the portfolio?

Answer #1

1. a)Average Return of B=(13%-14%-9%+28%+8%+7%)/6 =5.50%

b) Variance of B
=(13%-5.5%)^2+(-14%-5.50%)^2+(-9%-5.50%)^2+(28%-5.50%)^2+((8%-5.50%)^2+(7%-5.50%)^2)/(6-1)
= 11.55%

Average Return of A =(14%-15%-6%+5%+14%+15%)/6 =4.50%

c) Covariance of Return
=((14%-4.50%)*((13%-5.5%)+(-15%-4.50%)*((-14%-5.50%)+(-6%-4.50%)*((-9%-5.50%)+(5%-4.50%)*((28%-5.50%)+(14%-4.50%)*((8%-5.50%)+(15%-4.50%)*((7%-5.50%))/(6-1)
= 0.1309

Max 1 question its subparts can be solved.

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Problem 5
Intro
The following table shows rates of return for two stocks.
A
B
C
1
Year
Stock A
Stock B
2
1
14%
13%
3
2
-10%
-14%
4
3
-6%
-4%
5
4
5%
28%
6
5
14%
8%
7
6
5%
7%
Attempt 1/3 for 10 pts.
Part 1
What is the arithmetic average return for stock B?
Submit
Attempt 1/3 for 10 pts.
Part 2
What is the covariance of returns? (Use =COVARINACE.S function
in...

The table below shows the expected rates of return for three
stocks and their weights in some portfolio:
Stock A
Stock B
Stock C
Portfolio weights
0.3
0.2
0.5
State
Probability
Expected returns
Recession
0.2
0.08
0.03
0.14
Boom
0.8
0.13
0.05
0.15
1. What is the portfolio return during a recession?
2. What is the expected portfolio return?
3. What is the standard deviation of the portfolio returns?

The table below shows annual returns for stocks of companies X
and Y. Calculate the arithmetic average returns. In addition,
calculate their variances, as well as their standard
deviations.
Returns
Year
X
Y
1
7 %
22 %
2
25
43
3
14
-9
4
-15
-23
5
16
51
Requirement 1:
(a)
The arithmetic average return of company X's stock is:
(Click to
select) 7.61% 10.62% 9.40% 11.75% 11.47%
(b)
The...

1. Toyota Corp.'s stock is $30 per share. Its
expected return is 22% and variance is
15%. Honda Corp.'s stock is $22
per share. Its expected return is 17% and variance
is 8%. Benz Corp.'s stock is $50
per share. Its expected return is 10% and variance
7%. What would be the expected return of a
portfolio consisting of 50% Toyota and 50% Honda?
% _____
* Place your answer in percentage form, say 5.99% and not .0599
2. Toyota...

Consider the following probability distribution for stocks A and
B:
State
Probability
Return on Stock A
Return on Stock B
1
0.10
10%
8%
2
0.20
13%
7%
3
0.20
12%
6%
4
0.30
14%
9%
5
0.20
15%
8%
The coefficient of correlation between A and B is
(Hint: compute variance and covariance first.)
Group of answer choices
0.47.
none of the above.
0.60.
0.58
1.20.

Assume Stocks A and B have the following characteristics: Stock
Expected Return Standard Deviation A 8.3% 32.3% B 14.3% 61.3% The
covariance between the returns on the two stocks is .0027. a.
Suppose an investor holds a portfolio consisting of only Stock A
and Stock B. Find the portfolio weights, XA and XB, such that the
variance of her portfolio is minimized. (Hint: Remember that the
sum of the two weights must equal 1.) (Do not round intermediate
calculations and...

2: Consider the following 6 months of return for 2 stocks and a
portfolio of those 2 stocks
Jan
Feb
Mar
Apr
May
Jun
Stock
A
2%
5%
-6%
3%
-2%
4%
Stock
B
0%
-3%
8%
-1%
4%
-2%
Portfolio
1%
1%
1%
1%
1%
1%
A: What is the average monthly return and standard deviation of
returns for each of the two stocks?
B: what is the average monthly return and standard deviation of
returns for the...

The table below shows annual returns for stocks of companies X
and Y. Calculate the arithmetic average returns. In addition,
calculate their variances, as well as their standard
deviations.
Returns
Year
X
Y
1
15 %
18 %
2
33
39
3
22
-11
4
-23
-25
5
24
47
Requirement 1:
(a)
The arithmetic average return of company X's stock is:
(Click to
select) 14.20% 16.05% 11.50% 17.75% 17.32%
(b)
The...

,
Stocks A and B have the following returns:
Stock A
Stock B
1
0.09
0.07
2
0.07
0.04
3
0.12
0.04
4
−0.03
0.02
5
0.08
−0.05
a. What are the expected returns of the two stocks?
b. What are the standard deviations of the returns of the two
stocks?
c. If their correlation is 0.46 ,what is the expected return and
standard deviation of a portfolio of
76% stock A and 24% stock B?
a. What are the...

1. Calculate the rates of return (holding period returns) for
the following stocks:
Stock
Beginning price: P0
Ending price: P1
Dividend payment: D1
A
21.38
16.06
2.6
B
108.74
118.92
5.25
C
4.25
5.58
0.19
Part 1
What was the rate of return for stock A?
Part 2
What was the rate of return for stock B?
Part 3
What was the rate of return for stock C?
2. You bought Samsung stock for $45 on April 1. The stock...

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