Question

An individual stock has an annualized volatility of 60%. Consider a portfolio of six stocks; one...

An individual stock has an annualized volatility of 60%. Consider a portfolio of six stocks; one position is half the portfolio and the other five are each 10% of the portfolio.

a. What is the volatility (risk) of the portfolio assuming the positions are uncorrelated?

b. What number of independent and equally weighted stocks would have the same amount of risk?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider a portfolio consisting of the following three stocks: Portfolio Weight Volatility Correlation with the Market...
Consider a portfolio consisting of the following three stocks: Portfolio Weight Volatility Correlation with the Market Portfolio HEC corporation 0.27 13% 0.37 Green Midget 0.39 29% 0.64 AliveAndWell 0.34 12% 0.53 The volatility of the market portfolio is 10% and it has an expected return of 8%. The risk-free rate is 3% a. Compute the beta and expected return of each stock. (Round to two decimal places.) b. Using your answer from part a, calculate the expected return of the...
Consider a $10 million portfolio that consists of the following five stocks: Stock $Amount Invested Beta...
Consider a $10 million portfolio that consists of the following five stocks: Stock $Amount Invested Beta A 4 million 1.7 B 2 million 1.1 C 2 million 1.0 D 1 million 0.7 E 1 million 0.5 What is the required return on this portfolio if the risk free rate of return is 5.9% and the market risk premium is 5%?
Elle holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as...
Elle holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table: Stock Investment Beta Standard Deviation Omni Consumer Products Co. (OCP) $3,500 1.00 12.00% Zaxatti Enterprises (ZE) $2,000 1.30 11.00% Water and Power Co. (WPC) $1,500 1.10 20.00% Flitcom Corp. (FC) $3,000 0.40 19.50% Suppose all stocks in Elle’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to...
Cheyenne holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as...
Cheyenne holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table: Stock Investment Beta Standard Deviation Omni Consumer Products Co. (OCP) $1,750 1.00 9.00% Tobotics Inc. (TI) $1,000 1.30 11.00% Western Gas & Electric Co. (WGC) $750 1.10 20.00% Makissi Corp. (MC) $1,500 0.30 19.50% Suppose all stocks in Cheyenne’s portfolio were equally weighted. Which of these stocks would contribute the least market risk...
Elle holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as...
Elle holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table : Stock Investment Beta Standard Deviation Omni Consumer Products Co. (OCP) $3,500 1.00 9.00% Tobotics Inc. (TI) $2,000 1.50 11.50% Three Waters Co. (TWC) $1,500 1.15 20.00% Mainway Toys Co. (MTC) $3,000 0.30 22.50% Suppose all stocks in Elle’s portfolio were equally weighted. Which of these stocks would contribute the least market risk...
Cheyenne holds a $7,500 portfolio that consists of four stocks. Her investment in each stock, as...
Cheyenne holds a $7,500 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table: Stock Investment Beta Standard Deviation Andalusian Limited (AL) $2,625 0.90 18.00% Kulatsu Motors Co. (KMC) $1,500 1.30 12.00% Western Gas & Electric Co. (WGC) $1,125 1.20 18.00% Mainway Toys Co. (MTC) $2,250 0.60 19.50% Suppose all stocks in Cheyenne’s portfolio were equally weighted. Which of these stocks would contribute the least market risk...
Elle holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as...
Elle holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table: Stock Investment Beta    Standard Deviation Omni Consumer Products Co. (OCP) $3,500    0.90 15.00% Kulatsu Motors Co. (KMC)    $2,000 1.70 11.00% Water and Power Co. (WPC)    $1,500    1.10    18.00% Mainway Toys Co. (MTC)    $3,000    0.50 25.50% Suppose all stocks in Elle’s portfolio were equally weighted. Which...
4. You own a portfolio equally invested in a risk-free asset and two stocks. If one...
4. You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.25 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio.
. Portfolio risk and return Emma holds a $5,000 portfolio that consists of four stocks. Her...
. Portfolio risk and return Emma holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table: Stock Investment Beta Standard Deviation Andalusian Limited (AL) $1,750 0.90 12.00% Tobotics Inc. (TI) $1,000 1.30 12.00% Water and Power Co. (WPC) $750 1.20 18.00% Makissi Corp. (MC) $1,500 0.40 19.50% Suppose all stocks in Emma’s portfolio were equally weighted. Which of these stocks would contribute the least...
7. Portfolio risk and return Ariel holds a $7,500 portfolio that consists of four stocks. Her...
7. Portfolio risk and return Ariel holds a $7,500 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table: Stock Investment Beta Standard Deviation Perpetualcold Refrigeration Co. (PRC) $2,625 0.90 18.00% Zaxatti Enterprises (ZE) $1,500 1.70 11.00% Western Gas & Electric Co. (WGC) $1,125 1.10 18.00% Flitcom Corp. (FC) $2,250 0.60 25.50% Suppose all stocks in Ariel’s portfolio were equally weighted. Which of these stocks would contribute...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT