Question

You are given the following information concerning a stock and the market:

Returns | ||||||

Year | Market | Stock | ||||

2011 | 10 | % | 25 | % | ||

2012 | 10 | 10 | ||||

2013 | 21 | 5 | ||||

2014 | −15 | −30 | ||||

2015 | 37 | 16 | ||||

2016 | 15 | 17 | ||||

**a.** Calculate the average return and standard
deviation for the market and the stock. **(Use Excel to
complete the problem. Do not round intermediate calculations. Enter
your answers as a percent rounded to 2 decimal
places.)**

Market | Stock | |

Average Return | ||

Standard Deviation |

**b.** Calculate the correlation between the stock
and the market, as well as the stock’s beta. **(Use Excel to
complete the problem. Do not round intermediate calculations. Round
your correlation answer to 2 decimal places and beta answer to 4
decimal places.)**

Correlation | |

Beta |

Answer #1

You are given the following information concerning a stock and
the market:
Returns
Year
Market
Stock
2011
16
%
28
%
2012
20
20
2013
26
5
2014
−12
−23
2015
35
16
2016
15
28
a. Calculate the average return and standard
deviation for the market and the stock. (Use Excel to
complete the problem. Do not round intermediate calculations. Enter
your answers as a percent rounded to 2 decimal
places.)
Market
Stock
Average return
%
%
Standard deviation...

Stocks A and B have the following historical returns:
Year
Stock A's Returns, rA
Stock B's Returns, rB
2011
- 21.60%
- 15.00%
2012
24.00
23.50
2013
16.50
33.90
2014
- 1.50
- 7.70
2015
26.50
9.20
Calculate the average rate of return for stock A during the
period 2011 through 2015. Round your answer to two decimal
places.
%
Calculate the average rate of return for stock B during the period
2011 through 2015. Round your answer to two...

Problem 6-06
Expected Returns: Discrete Distribution
The market and Stock J have the following probability
distributions:
Probability
rM
rJ
0.3
15%
21%
0.4
8
3
0.3
18
13
Calculate the expected rate of return for the market. Round your
answer to two decimal places.
%
Calculate the expected rate of return for Stock J. Round your
answer to two decimal places.
%
Calculate the standard deviation for the market. Do not round
intermediate calculations. Round your answer to two decimal...

Problem 2-14
Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year
Stock X
Stock Y
Market
2011
16%
12%
13%
2012
19
7
10
2013
-15
-2
-14
2014
4
1
1
2015
24
9
17
Assume that the risk-free rate is 4% and the market risk premium
is 7%. Do not round intermediate calculations.
What is the beta of Stock X? Round your answer to two decimal
places.
What is...

You are given the following information:
State of
Economy
Return on
Stock A
Return on
Stock B
Bear
.119
-.062
Normal
.098
.165
Bull
.090
.250
Assume each state of the economy is equally likely to happen.
Calculate the expected return of each stock. (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 2 decimal places, e.g., 32.16.)
Expected return
Stock A
______%
Stock B
______%
Calculate the standard deviation of each stock. (Do not...

Expected Returns: Discrete Distribution
The market and Stock J have the following probability
distributions:
Probability
rM
rJ
0.3
15%
22%
0.4
9
4
0.3
19
13
Calculate the expected rate of return for the market. Round your
answer to two decimal places.
%
Calculate the expected rate of return for Stock J. Round your
answer to two decimal places.
%
Calculate the standard deviation for the market. Do not round
intermediate calculations. Round your answer to two decimal
places.
%...

You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.97.
Year
Fund
Market
Risk-Free
2011
–21.2
%
–40.5
%
2
%
2012
25.1
21.1
4
2013
14.0
14.2
2
2014
6.2
8.8
4
2015
–2.16
–5.2
3
What are the Sharpe and Treynor ratios for the fund? (Do
not round intermediate calculations. Round your answers to...

You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.97.
Year
Fund
Market
Risk-Free
2011
–22.4
%
–42.5
%
3
%
2012
25.1
21.3
5
2013
14.2
14.8
2
2014
6.6
8.8
6
2015
–2.28
–5.2
3
What are the Sharpe and Treynor ratios for the fund? (Do
not round intermediate calculations. Round your answers to...

You have been given the following return information for a
mutual fund, the market index, and the risk-free rate. You also
know that the return correlation between the fund and the market is
0.97.
Year
Fund
Market
Risk-Free
2011
–15.06
%
–26.5
%
3
%
2012
25.1
19.7
5
2013
12.6
10.0
2
2014
6.6
7.6
4
2015
–1.32
–2.2
3
What are the Sharpe and Treynor ratios for the fund? (Do
not round intermediate calculations. Round your answers to...

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....

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