Question

Given the returns for two stocks with the following information, calculate the correlation coefficient of the returns for the two stocks. Assume the expected return is 14.4 percent for Stock 1 and 15.9 percent for Stock 2. Do not round intermediate computations.

Prob
Stock
1 Stock
2

0.5
0.11
0.18

0.3
0.17
0.15

0.2
0.19
0.12

Answer #1

Given the distributions of returns for the following two stocks,
calculate the covariance of the returns for the two stocks. Assume
the expected return is 10.8 percent for Stock 1 and 9.7 percent for
Stock 2.
Prob
Stock 1
Stock 2
0.4
0.09
0.11
0.5
0.11
0.08
0.1
0.17
0.13
0.000321
0.000094
0.000516
0.717507

We know the following expected returns for stocks A and B, given
different states of the economy:
State (s)
Probability
E(rA,s)
E(rB,s)
Recession
0.2
-0.05
0.05
Normal
0.5
0.1
0.08
Expansion
0.3
0.18
0.12
1. What is the expected return for stock A?
2. What is the expected return for stock B?
3. What is the standard deviation of returns for stock A?
4. What is the standard deviation of returns for stock B?

Stock A and B have the following returns:
Stock A
Stock B
1
0.10
-0.03
2
0.17
0.10
3
0.05
0.05
4
-0.05
0.15
5
-0.08
0.12
a. What are the expected returns of the two stocks?
b. What are the standard deviations of the two stocks?
c. If their correlation is 0.75, what is the expected return and
standard deviation of a portfolio of 35% stock A and 65% Stock
B?

Consider the following information on Stocks A, B, C and their
returns (in decimals) in each state: State Prob. of State A B C
Boom 20% 0.32 0.2 0.17 Good 45% 0.12 0.09 0.08 Poor 25% 0.04 0.01
0.03 Bust 10% -0.08 -0.06 -0.01 If your portfolio is invested 25%
in A, 40% in B, and 35% in C, what is the standard deviation of the
portfolio in percent? Answer to two decimals, carry intermediate
calcs. to at least four...

Plot V versus I for the data from Step P4. Does the resistance
of the filament of the lamp increase, decrease, or stay the same?
What indicates your observation? Is the Ohm's Law obeyed by the
lamp? Explain.
Volt
mAmp
0
0
0.1
0.02
0.2
0.06
0.3
0.09
0.4
0.11
0.5
0.12
0.6
0.13
0.7
0.14
0.8
0.14
0.9
0.15
1
0.16
1.1
0.17
1.2
0.17
1.3
0.18
1.4
0.19
1.5
0.2

Consider the following information on Stocks A, B, C and their
returns (in decimals) in each state:
State
Prob. of State
A
B
C
Boom
20%
0.26
0.18
0.17
Good
45%
0.12
0.08
0.09
Poor
25%
0.04
0.02
0.03
Bust
10%
-0.1
-0.04
-0.01
If your portfolio is invested 25% in A, 40% in B, and 35% in C,
what is the standard deviation of the portfolio in percent?

EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(7%)
(28%)
0.3
2
0
0.3
12
18
0.2
20
25
0.1
39
37
Calculate the expected rate of return, rB, for Stock
B (rA = 11.40%.) Do not round intermediate calculations.
Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns,
σA, for Stock A (σB = 17.60%.) Do not round
intermediate calculations. Round your...

EXPECTED RETURNS
Stocks A and B have the following probability distributions of
expected future returns:
Probability
A
B
0.1
(5%)
(27%)
0.2
4
0
0.3
11
19
0.2
18
29
0.2
33
48
Calculate the expected rate of return, rB, for Stock B (rA =
13.80%.) Do not round intermediate calculations. Round your answer
to two decimal places.
%
Calculate the standard deviation of expected returns, ?A, for
Stock A (?B = 21.72%.) Do not round intermediate calculations.
Round your...

,
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...

Stocks A and B have a correlation coefficient of -0.8. The stocks'
expected returns and standard deviations are in the table below. A
portfolio consisting of 40% of stock A and 60% of stock B is
constructed.
Stock
Expected
Return
Standard
Deviation
A
20%
25%
B
15%
19%
Refer to Exhibit 8.14. What percentage of stock A should be
invested to obtain the minimum risk portfolio that contains stock A
and B?
a. 42%
b. 58%
c. 65%
d. 72%...

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