Your portfolio allocates equal amounts to three stocks. All three stocks have the same mean annual return of 20 percent. Annual return standard deviations for these three stocks are 42 percent, 52 percent, and 62 percent. The return correlations among all three stocks are zero. What is the smallest expected loss for your portfolio in the coming year with a probability of 5 percent? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Smallest expected loss -33.22 %
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- Stock A has expected return of 15% and standard deviation (s.d.) 20%. Stock B has expected return 20% and s.d. 15%. The two stocks have a correlation coefficient of 0.5. 1.Note that Stock A has greater risk (s.d.) that Stock B, but a lower expected return. Explain how is this possible in a world where returns on assets are as predicted by the CAPM. 2. Determine the expected return and the s.d. of portfolio P1, composed by investing 30% in stock A and 70% in stock B. 3. Consider stock C that has expected return 15% and s.d. 15%. Stock C is uncorrelated with either stock A and stock B. Determine the expected return and s.d. of portfolio P2 made by investing 50% in stock C and 50% in portfolio P1.Stocks A and B have the following probability distributions of expected future returns: a. Calculate the expected rate of return, B, for Stock B (A = 12.50%.) Do not round intermediate calculations. Round your answer to two decimal places. % b. Calculate the standard deviation of expected returns, GA, for Stock A (σ = 20.90%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? I. If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense. II. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense. III. If Stock B is less highly correlated with…Stocks A and B have the following probability distributions of expected future returns: a. Calculate the expected rate of return, TB, for Stock B (A = 13.80%.) Do not round intermediate calculations. Round your answer to two decimal places. % Probability 0.1 0.1 0.5 0.2 0.1 b. Calculate the standard deviation of expected returns, JA, for Stock A (OB = 20.40%.) Do not round intermediate calculations. Round your answer to two decimal places. % -Select- A (11%) 6 13 20 38 Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. B (34%) 0 24 30 44 Is it possible that most investors might regard Stock B as being less risky than Stock A? I. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense. II. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be…
- Stocks A and B have the following probability distributions of expected future returns: Probability 0.1 0.2 0.5 0.1 0.1 A (5%) 2 Stock B 14 24 39 (40%) 0 24 30 42 a. Calculate the expected rate of return, Fa, for Stock B (FA-13.20%) Do not round intermediate calculations. Round your answer to two decimal places. b. Calculate the standard deviation of expected returns, da, for Stock A (de-21.99 %) Do not round intermediate calculations. Round your answer to two decimal places. Now calculate the coefficient of variation for Stock 8. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? 1. If Stock Bis more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense. 11. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky…A stock has a beta of 0.9 and an expected return of 9 percent. A risk-free asset currently earns 4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete and correct. Expected return 6.50 % b. If a portfolio of the two assets has a beta of 0.5, what are the portfolio weights? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Stock Risk-free asset Portfolio Weight % %Stock A has expected return of 15% and standard deviation (s.d.) 20%. Stock B has expected return 20% and s.d. 15%. The two stocks have a correlation coefficient of 0.5. a. Note that Stock A has greater risk (s.d.) that Stock B, but a lower expected return. Explain how is this possible in a world where returns on assets are as predicted by the CAPM. The beta of stock A is 1 and the beta of stock B is 1.5. What is the risk premium on the market portfolio, if the CAPM holds ?
- Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .092, E(RB) = 152, đA = .362, and Og = .622. %3D Calculate the expected return of a portfolio that is composed of 37 percent A and 63 percent B when the correlation between the returns on A and B is .52. (Do not a-1. round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Calculate the standard deviation of a portfolio that is composed of 37 percent A and 63 percent B when the correlation coefficient between the returns on A and B is .52. а-2. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Calculate the standard deviation of a portfolio with the same portfolio weights as in h part (a) when the correlation coefficient between the returns on A and B is -.52. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a-1.…Stocks A and B have the following probability distributions of expected future returns: profitability A B 0.1 11% 27% 0.2 3 0 0.4 12 20 0.2 24 28 0.1 36 43 Calculate the expected rate of return, , for Stock B ( = 12.70%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 18.54%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be…Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (6 %) (25 %) 0.2 6 0 0.5 16 23 0.1 23 27 0.1 37 43 Calculate the expected rate of return, , for Stock B ( = 14.60%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 18.13%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense. If Stock B is less highly correlated with the market than A, then it might have a lower…
- Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (10 %) (29 %) 0.1 3 0 0.5 11 19 0.2 22 28 0.1 33 40 A. Calculate the expected rate of return, , for Stock B ( = 12.50%.) Do not round intermediate calculations. Round your answer to two decimal places. % B. Calculate the standard deviation of expected returns, σA, for Stock A (σB = 17.86%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense. If Stock B is less highly correlated with the market than A, then it might have a…Stocks A and B have the following probability distributions of expected future returns: Probability B 0.1 (31%) 0.1 0 0.6 23 0.1 26 0.1 44 a. Calculate the expected rate of return, B, for Stock B (A = 14.20%.) Do not round intermediate calculations. Round your answer to two decimal places. 17.7 % b. Calculate the standard deviation of expected returns, GA, for Stock A (OB = 19.01%.) Do not round intermediate calculations. Round your answer to two decimal places. % A (6%) 5 14 20 39 Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. 1.07 IV Is it possible that most investors might regard Stock B as being less risky than Stock A? I. If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense. II. If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence…Please do not give solution in image formate thanku. Consider three investments. You are given the following means, standard deviations, and correlations for the annual return on these three investments. The means are 0.12, 0.15, and 0.20. The standard deviations are 0.20, 0.30, and 0.40. The correlation between stocks 1 and 2 is 0.65, between stocks 1 and 3 is 0.75, and between stocks 2 and 3 is 0.41. You have $10,000 to invest and can invest no more than half of your money in any single stock. Determine the minimum-variance portfolio that yields a mean annual return of at least 0.14. PLEASE USE SOLVER (SHOW EACH STEP) AND DO NOT COPY OTHERS. THANKS!