Contemplating investing in portfolio made up of two stocks

Assignment Help Risk Management

Reference no: EM131947441

1. You are contemplating investing in a portfolio made up of two stocks, A and B. The beta of Stock A is 1.4, and the beta of Stock B is -1.3. Assume you plan to invest X% in Stock A, and the rest of your capital (that is, 1-X) in Stock B. What should X be so that the beta of the resulting portfolio is zero?

2. Consider an amortizing loan. The amount borrowed initially is $89202, the interest rate is 6% APR, and the loan is to be repaid in equal monthly payments over 13 years. As we know, while each monthly payment will be the same, the amounts of interest and principle paid will change from payment to payment. How much of the very first payment is interest?

3. The index model has been estimated for stocks A and B with the following results:

R(A) = 0.02 + 1.1Rm

R(B) = 0.02 + 1.2Rm

Additionally, the standard deviation of the market index is 16%.

What is the covariance between stocks A and B?

Reference no: EM131947441

Questions Cloud

Concern to holders of mortgage pass through securities : Why is mortgage prepayment a concern to holders of mortgage pass through securities.

Explain the process of evidence-based analysis : Explain the process of evidence-based analysis. Highlight the major players and their roles in EBM policy (i.e., government, providers, patients, etc.).

How much is the total monthly payment for mortgage : You decide to buy a house for a total of $198842. How much is the TOTAL monthly payment for this mortgage?

What is the fiscal health of the united states : What is the fiscal health of the United States and what is the fiscal health of one other country?

Contemplating investing in portfolio made up of two stocks : You are contemplating investing in a portfolio made up of two stocks, A and B. What is the covariance between stocks A and B?

Why would an entity want to trademark a product : Why would an entity want to trademark a product or service as opposed to incorporating that product or service?

Provide a written analysis of the implementation phases : Provide a written analysis of the implementation phases that were used/excluded in the "340B Drug Pricing Program Oversight" case.

Firm in perfect competition : How does a firm that is losing money in the short run decide whether to shut down or continue to produce to minimize its losses?

What is the implicit in the first year of the bonds is : Zero coupon bonds pay the investor the face value on the maturity date. What is the implicit in the first year of the bonds is?

User Account

All Pages