Reference no: EM133114857
Calculate the followings and verify the diversification effect with the data in the table assuming that with the initial endowment of $10,000, you invest $6,000 in Stock A and $4,000 in Stock B. Also four states of the economy are assumed to be equally likely.
|
State of Econ
|
Stock A
|
Stock B
|
|
Depression
|
-20%
|
5%
|
|
Recession
|
10%
|
20%
|
|
Normal
|
30%
|
-12%
|
|
Boom
|
50%
|
9%
|
Q. 1: Expected rate of return for each security
Q. 2: Expected rate of return for the portfolio with the stock A and B
Q. 3: Variance for each security
Q. 4: Standard deviation for each security
Q. 5: Weighted average of standard deviations of two securities
Q. 6: Covariance between securities
Q. 7: Correlation coefficient between securities
Q. 8: Variance of the portfolio
Q. 9: Standard deviation of the portfolio
Q. 10: Compare the weighted average of standard deviations of two securities with the portfolio standard deviation. (a) Did you see diversification effect? (b) Why? Justify your answer in part (a).
|
What amount was reported as net income for the current year
: During the year, the entity sold 100,000 shares with P20 par value for P30 per share and received cash in full. What amount was reported as net income
|
|
Explain the investing principles for a risk-averse investor
: How can an investor reduce the risk without correspondingly reducing the returns? Explain the investing principles for a risk-averse investor.
|
|
What rate of return is built into the annuity
: 1. Suppose you just won the state lottery, and you have a choice between receiving $3,550,000 today or a 20-year annuity of $250,000, with the first payment com
|
|
What journal entries should intel record on december
: The computer chips had a total production cost of $1.59 million. What journal entries should Intel record on December 18 and January 23
|
|
Calculate the followings and verify the diversification
: Calculate the followings and verify the diversification effect with the data in the table assuming that with the initial endowment of $10,000, you invest $6,000
|
|
Prepare the journal entry to record the adjustment
: At December 31, 2020, CPS's inventories were $52 million (FIFO). Prepare the journal entry to record the adjustment
|
|
What is the expected return on the portfolio
: If the expected return on AA is 16% and on ??B is 11%, what is the expected return (in %) on the portfolio?
|
|
What amount should be reported as total shareholders equity
: The entity used the cost method of accounting for treasury shares. What amount should be reported as total shareholders' equity on December 31, 2020
|
|
Investing in stock w
: You are considering investing in stock W. It has just paid a dividend of £1.371.37 and you estimate that dividends in the company will grow at a rate of 4%4% pe
|