Question

Assume the following statistics for two companies:  Blue Plc. and Purple Plc Blue Plc. Purple Plc Average...

Assume the following statistics for two companies:  Blue Plc. and Purple Plc

Blue Plc. Purple Plc
Average return 17.50% 30.00%
Variance 0.05 0.17
Standard deviation 22.36% 41.23%
Correlation 0.5
Portfolio weights
% in Blue Plc. 50%
% in Purple Plc. 50%

i. Calculate the covariance between the two shares

ii. Calculate the expected portfolio return and portfolio variance

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
You are given the following information about the stocks in a two-stock portfolio Stock Return Portfolio...
You are given the following information about the stocks in a two-stock portfolio Stock Return Portfolio Weight Standard Deviation Blue Hotel Inc. 22% 45% 9% Joys Food Inc. 25% 55% 11% The correlation coefficient between the two stocks is 0.5. Using the information above, calculate the following: The expected return of the portfolio, The variance of the portfolio, The standard deviation of the portfolio.
Honeywell (HON) and United Technologies Inc. (UTI) are two leading aerospace defense contractors. HON has an...
Honeywell (HON) and United Technologies Inc. (UTI) are two leading aerospace defense contractors. HON has an expected return of 16% and a standard deviation of 52%. UTI has an expected return of 13% and a standard deviation of 48%. The correlation between the two companies is .65. Determine the weights of the minimum variance portfolio? Also, calculate the expected return and the standard deviation of the minimum variance portfolio.
Honeywell (HON) and United Technologies Inc. (UTI) are two leading aerospace defense contractors.  HON has an expected...
Honeywell (HON) and United Technologies Inc. (UTI) are two leading aerospace defense contractors.  HON has an expected return of 16% and a standard deviation of 52%. UTI has an expected return of 13% and a standard deviation of 48%. The correlation between the two companies is .65. Determine the weights of the minimum variance portfolio? Also, calculate the expected return and the standard deviation of the minimum variance portfolio.
Consider the following information on the expected return for companies X and Y. Economy Probability X...
Consider the following information on the expected return for companies X and Y. Economy Probability X Y Boom 0.17 31% 12% Neutral 0.60 17% 24% Poor 0.23 −31% 10% a. Calculate the expected value and the standard deviation of returns of companies X and Y. (Round your final answers to 2 decimal places.) Company X Company Y Expected value % % Standard deviation % % b. Calculate the correlation coefficient if the covariance between X and Y is 70. (Round...
The following information is available for two stocks: Stock Shares Price per share Expected Return Standard...
The following information is available for two stocks: Stock Shares Price per share Expected Return Standard Deviation A 500 $40 14% 18% B 400 $25 21% 22% You are fully invested in the two stocks. The correlation coefficient between the two stock returns is .80 a. Compute the weights of the two stocks in your portfolio. b. Compute the portfolio expected return. c. Compute the portfolio standard deviation. d. You consider selling 250 shares of stock A, and buy with...
2b. Calculate the expected return and standard deviation of a portfolio made up of 50% stock...
2b. Calculate the expected return and standard deviation of a portfolio made up of 50% stock C and 50% stock D if the correlation is -0.75. Probability Stock C Weighted Return Expected Return Deviation SQd Dev. Prob * Sqrd Deviaiton 0.3 -10% -3.00% 12.50% -22.50000% 0.0506 0.0151875 0.5 15% 7.50% 12.50% 2.50000% 0.0006 0.0003125 0.2 40% 8.00% 12.50% 27.50000% 0.0756 0.015125 Variance 3.06% Standard Deviation 17.50% Probability Stock D Weighted Return Expected Return Deviation SQd Dev. 0.3 25% 7.50% 12.50%...
You are considering the following investing in a US stock index fund and a US bond...
You are considering the following investing in a US stock index fund and a US bond index fund. These represent the only 2 investments available to you at this time. You have the following additional information: US Stocks US Bonds Expected Return 25% 15% Standard Deviation 27% 20% Variance 0.0729 0.0400 PS,B 0.70 Covariance (S,B) 0.0378 Calculate the weights for stocks and bonds for the minimum variance portfolio. Show your work (if you are using Excel, include a screenshot of...
Assume Stocks A and B have the following characteristics: Stock Expected Return Standard Deviation A 8.3%...
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...
Consider the following statistics of the returns of Stock A, Stock B and the market (m):...
Consider the following statistics of the returns of Stock A, Stock B and the market (m): sA = 0.20      corrA,m = 0.4 sB = 0.30      corrB,m = 0.7 sm = 0.15 E(rm) = 0.10 Suppose further that the risk-free rate is 5%.        (a)    According to the Capital Asset Pricing Model, what should be the expected return of Stock     A and of Stock B? [Hint: This is an open-book exam.]                             (b) Suppose that the correlation between the...
Consider the following two assets: Asset A: expected return is 4% and standard deviation of return...
Consider the following two assets: Asset A: expected return is 4% and standard deviation of return is 42% Asset B: expected return is 1.5% and standard deviation of return is 24% The correlation between the two assets is 0.1. (1) Compute the expected return and the standard deviation of return for 4 portfolios with different weights w on asset A (and therefore weight 1-w on B): w=-0.5, w=0.3, w=0.8, w=1.3. (2) Then sketch a portfolio frontier with the 4 portfolios,...