A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 23%, while stock B has a standard deviation of return of 17%. Stock A comprises 70% of the portfolio, while stock 8 comprises 30% of the portfolio. If the variance of return on the portfolio is 0.040, the correlation coefficient between the returns on A and B is. Multiple Choice 0.699 0.489 0.210 0.119

A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 23%, while stock B has a standard deviation of return of 17%. Stock A comprises 70% of the portfolio, while stock 8 comprises 30% of the portfolio. If the variance of return on the portfolio is 0.040, the correlation coefficient between the returns on A and B is. Multiple Choice 0.699 0.489 0.210 0.119

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance between Stock X and Stock Y is 0.10. The standard deviation of Stock X is 0.50, and the standard deviation of Stock Y is 0.50. Which of the following comes closest to the variance of the portfolio? Select one: a. 0.60 b. 1.00 c. 0.42 d. 0.18 e. 0.55
A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 24%, while stock B has a standard deviation of return of 18%. Stock A comprises 60% of the portfolio, while stock B comprises 40% of the portfolio. If the variance of return on the portfolio is .0380, the correlation coefficient between the returns on A and B is _________. ) .583 ) .225 ) .327 ) .128
Portfolios A and B are both well-diversified. The risk-free rate is 8%. The return for the market is 10%. Portfolio A has an expected return of 15% and beta of 1.1. Portfolio B has an expected return of 9% and beta of 0.20. Portfolio A's variance is 9%, whilst Portfolio B's variance is 5.5%. Calculate for Portfolio A and Portfolio B the following: 1. Sharpe's Measure, 2. Treynor's Measure, 3. Jensen's Measure. Which is the better portfolio according to each measure?
Assume that the covariance between Stock A and Stock B is -28%^2 (0.0028). Compute the expected rate of return and variance of rate of return of Donald’s portfolio.
Suppose Stock A has an expected return of 18% and a variance of 0.17, while Stock B has an expected return of 11% and a variance of 0.056. The covariance between Stocks A and B is -0.075. What is the expected return and standard deviation of a portfolio with 60% in A and 40% in B?
Stock A has a return variance (that is σ2) of 0.02. The market portfolio has a return variance of 0.03. The covariance between stock A’s return and market portfolio’s return is 0.01. Stock A has an expected return of 0.09, while the market has an expected return of 0.12. What is the expected return and standard deviation of a portfolio that is 65% invested in A and 35% invested in the market portfolio? a. ER = 10.1%, σ = 12.9% b. ER = 10.8%, σ = 16.7% c. ER = 10.1%, σ = 16.7% d. ER = 9.0%, σ = 12.9% e. ER = 8.5%, σ = 10.1%
A person is interested in constructing a portfolio. Two stocks are being considered. Letx = percent return for an investment in stock 1, and y = percent return for an investment instock 2. The expected return and variance for stock 1 are e(x) = 8.45% and Var(x) = 25.The expected return and variance for stock 2 are e(y) = 3.20% and Var(y) = 1. Thecovariance between the returns is sxy = −3.a. what is the standard deviation for an investment in stock 1 and for an investment instock 2? Using the standard deviation as a measure of risk, which of these stocks isthe riskier investment?
An investiment portfolio consists of two securities, X and Y. The weight of X is 30%. Asset X's expected return is 15% and the standard deviation is 28%. Asset Y's expected return is 23% and the standard deviation is 33%. Assume the correlation coefficient between X and Y is 0.37. A. Calcualte the expected return of the portfolio. B. Calculate the standard deviation of the portfolio return. C. Suppose now the investor decides to add some risk free assets into this portfolio. The new weights of X, Y and risk free assets are 0.21, 0.49 and 0.30. What is the standard deviation of the new portfolio?
. Find Portfolio Variance: Assume stock A, stock B, stock C are real estate stocks in a portfolio having weights in the portfolio of 20%, 35% & 45% respectively. The standard deviation of the assets is 3.2%, 3.5%, and 4%. The correlation coefficient between A and B is 0.6 between A and C is 0.8 and Between B and C is 0.5.
Suppose the index model for stocks A and B is estimated with the following results:rA = 2% + 0.8RM + eA, rB = 2% + 1.2RM + eB , σM = 20%, and RM = rM − rf . The regressionR2 of stocks A and B is 0.40 and 0.30, respectively.(a) What is the variance of each stock? (b) What is the firm-specific risk of each stock? (c) What is the covariance between the two stocks?
A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance between Stock X and Stock Y is 0.10. The standard deviation of Stock X is 0.50, and the standard deviation of Stock Y is 0.50. Which of the following comes closest to the correlation coefficient between Stock X and Stock Y? Select one: a. 0.60 b. 0.50 c. 1.00 d. 0.00 e. 0.40
3. Consider two stocks A and B with expected returns of 6% (stock A) and 8% (stock B). The matrix of variances and covariances is presented below: Stock A В A 0.0064 -0.008 B -0.008 0.01 a. Write the variance of the portfolio composed of A and B as a function of the proportion x invested in stock A. (1-x) is invested in B. Short sales are not allowed on the market. b. Write the variance of the portfolio composed of A and B as a function of the portfolio's expected return. c. What are the proportions invested in the minimum risk portfolio composed of A and B? d. Draw the graph of the portfolios combining A and B in a (V, E) space. V=variance, E=expected return. e. If the standard deviation of the pf is 7% what proportions were invested in A and B?

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