Question

1. Two stocks have the following possible outcomes:             Outcome Probability Stock W Market Stock X...

1. Two stocks have the following possible outcomes:

           

Outcome

Probability

Stock W

Market

Stock X

1

.15

+2%

+7%

+25%

2

.15

+18%

+4%

+10%

3

.40

+9%

+8%

+14%

4

.15

-12%

-9%

+3%

5

.15

+8%

-2%

-10%

a. What is the expected return for each stock and the Market?

b. What is the standard deviation for each stock and the Market?

c. What is the correlation between the stocks, and each stock and the Market?

d. If you hold a portfolio of the stocks that is weighted 60% W, and 40% X, what is the expected return and standard deviation for the portfolio?

e. What is the Beta for each of the stocks?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose there are two stocks, A and B. Also suppose there are two possible outcomes. Outcome...
Suppose there are two stocks, A and B. Also suppose there are two possible outcomes. Outcome 1 happens with 40% probability and outcome 2 happens with 60% probability. In outcome 1, stock A has 11% return and stock B has 5% return. In outcome 2, stock A has -2% return and stock B has 9% return. What is the correlation of their returns? -1 -60.56935191 -0.001248 -0.228735683
Stocks X and Y have the following probability distributions of expected future returns: Probability Stock X...
Stocks X and Y have the following probability distributions of expected future returns: Probability Stock X Stock Y 0.15 -5% -8% 0.35 7% 10% 0.30 15% 18% 0.20 10% 25% Expected return Standard deviation 6.42% Correlation between Stock X and Stock Y 0.8996 i. Calculate the expected return for each stock. ii. Calculate the standard deviation of returns for Stock Y. iii. You have $2,000. You decide to put $500 of your money in Stock X and the rest in...
1) Suppose you have $100,000 to invest in a PORTFOLIO OF TWO stocks: Stock A and...
1) Suppose you have $100,000 to invest in a PORTFOLIO OF TWO stocks: Stock A and Stock B. Your analysis of the two stocks led to the following risk -return statistics: Expected Annual Return Beta Standard Deviation A 18% 1.4 25% B 12% 0.6 16% The expected return on the market portfolio is 7% and the risk free rate is 1%. You want to create a portfolio with NO MARKET RISK. a) How much (IN DOLLARS) should you invest IN...
Using the data in the following table, answer questions. Year Stock X Stock Y 2012 -11%...
Using the data in the following table, answer questions. Year Stock X Stock Y 2012 -11% -5% 2013 15% 25% 2014 10% 15% 2015 -5% -15% 2016 5% -5% 2017 8% -2% 2018 7% 10% 2019 5% 15% Average return Standard deviation Correlation between Stock X and Stock Y 0.7567 1.Calculate the standard deviation of returns for Stocks X and Y. 2.For a portfolio that is 75% weighted in Stock X, and 25% weighted in Stock Y, calculate the expected...
1. Stocks X and Y have the following probability distributions: Returns Probability X Y 0.10 -5%...
1. Stocks X and Y have the following probability distributions: Returns Probability X Y 0.10 -5% -22% 0.20 -2% -3% 0.30 1% 6% 0.20 4% 17% 0.20 7% 24% (8 points) If you form a 50-50 portfolio of the two stocks, calculate the expected rate of return and the standard deviation for the portfolio.      (Remember, you must calculate a new range of outcomes for the portfolio.) Briefly explain why the standard deviation for the portfolio would be less than the...
There are two stocks in the market, stock A and stock B. The price of stock...
There are two stocks in the market, stock A and stock B. The price of stock A today is $80. The price of stock A next year will be $68 if the economy is in a recession, $88 if the economy is normal, and $100 if the economy is expanding. The probabilities of recession, normal times, and expansion are 0.2, 0.6, and 0.2, respectively. Stock A pays no dividends and has a beta of 0.83. Stock B has an expected...
Suppose that there are only two stocks, X and Y, listed in a market. There are...
Suppose that there are only two stocks, X and Y, listed in a market. There are 200 outstanding shares of stock X and 600 outstanding shares of stock Y. Current prices per share are pX = 40$ and pY = 20$. (i) What is the market portfolio in this market? Suppose that the expected returns on stocks X and Y are μX = 10% and μY = 20%. Standard deviation of returns are σX = 15% and σY = 30%....
, Stocks A and B have the following​ returns: Stock A Stock B 1 0.09 0.07...
, 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...
There are two stocks in the market, Stock A and Stock B . The price of...
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....
a) Michael has a portfolio comprising 2 assets: Stock X and Stock Y. Probability distribution of...
a) Michael has a portfolio comprising 2 assets: Stock X and Stock Y. Probability distribution of returns on Stock X and Stock Y are as follows Bear market Normal market Bull market Probability 0.2 0.5 0.3 Stock X -20% 18% 50% Stock Y -15% 20% 10% i)            What are the expected rates of return for Stocks X and Y? ii)           What are the standard deviations of returns on Stocks X and Y? ( b) You are a fund manager responsible for a...