Question

The standard deviation of the market-index portfolio is 30%. Stock A has a beta of 1.50 and a residual standard deviation of 40%. |

a-1. |
Calculate the total variance of stock A if its beta is increased
by 0.10? |

Total variance | .3904 |

a-2. |
Calculate the total variance of stock A if its residual standard
deviation is increased by 3.35% ? |

Total variance |

Answer #1

he standard deviation of the market-index portfolio is 15%.
Stock A has a beta of 2.00 and a residual standard deviation of
25%. a. Calculate the total variance for an increase of 0.20 in its
beta. (Do not round intermediate calculations. Round your answer to
the 4 decimal places.)
a.calculate total variance=
b. Calculate the total variance for an increase of 3.53% in its
residual standard deviation. (Do not round intermediate
calculations. Round your answer to the 4 decimal places.)...

The standard deviation of the market-index portfolio is 20%.
Stock A has a beta of 1.5 and a residual standard deviation of
30%.
a. Calculate the total variance for an increase
of .15 in its beta. (Do not round intermediate
calculations. Round your answer to 4 decimal places.)
b. Calculate the total variance for an increase
of 3% in its residual standard deviation. (Do not round
intermediate calculations. Round your answer to 4 decimal
places.)
(I tried 0.1989 for both...

The standard deviation of the market-index portfolio is 15%.
Stock A has a beta of 2.2 and residual standard deviation of
25%.
a) What would make a for a larger increase in the stock’s
variance: an increase of 0.2 in its beta or an increase of 3.84% in
its standard deviation?
b) An investor who currently holds the market-index portfolio
decides to reduce the portfolio allocation to the market index 90%
and to invest 10% in stock. Which of the...

There are two stocks in the market, Stock A and Stock B . The
price of Stock A today is $85. The price of Stock A next year will
be $74 if the economy is in a recession, $97 if the economy is
normal, and $107 if the economy is expanding. The probabilities of
recession, normal times, and expansion are .30, .50, and .20,
respectively. Stock A pays no dividends and has a correlation of
.80 with the market portfolio....

The market portfolio has an expected return of 11.0 percent and
a standard deviation of 21.0 percent. The risk-free rate is 4.0
percent.
a.
What is the expected return on a well-diversified portfolio with
a standard deviation of 8.0 percent? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places (e.g., 32.16).)
Expected return
%
b.
What is the standard deviation of a well-diversified portfolio
with an expected return of 19.0...

The following are estimates for two stocks.
Stock
Expected Return
Beta
Firm-Specific Standard Deviation
A
11
%
0.90
32
%
B
16
1.40
40
The market index has a standard deviation of 19% and the
risk-free rate is 11%.
a. What are the standard deviations of stocks
A and B?
b. Suppose that we were to construct a
portfolio with proportions:
Stock A
0.40
Stock B
0.40
T-bills
0.20
Compute the expected return, standard deviation, beta, and
nonsystematic standard deviation...

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...

A.)
A mutual fund manager has a $20 million portfolio with a beta of
1.50. The risk-free rate is 4.00%, and the market risk premium is
7.0%. The manager expects to receive an additional $5 million,
which she plans to invest in a number of stocks. After investing
the additional funds, she wants the fund's required return to be
17%. What should be the average beta of the new stocks added to the
portfolio? Do not round intermediate calculations. Round...

14. Stock A has a beta of 1.95 and a standard deviation of
return of 42%. Stock B has a beta of 3.75 and a standard deviation
of return of 70%. Assume that you form a portfolio that is 60%
invested in Stock A and 40% invested in Stock B. Using the
information in question 13, according to CAPM, what is the expected
rate of return on your portfolio? Enter your answer rounded to two
decimal places.
Question 13 for...

10-3 You have a portfolio with a beta of 1.37. What will be the
new portfolio beta if you keep 93 percent of your money in the old
portfolio and 7 percent in a stock with a beta of 0.97? (Do
not round intermediate calculations. Round your final answer to 2
decimal places.)
New Portfolio Beta _____________
10-4 Suppose Universal Forest’s current stock price is $66.00
and it is likely to pay a $0.39 dividend next year. Since analysts
estimate...

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