Covariance and the correlation of a stock return

Assignment Help Business Economics
Reference no: EM132373376

1. Suppose you buy 200 shares of Walt Disney Company at $30 per share and shares of Coca-Cola stock at $40 per share. If Disney's share price goes up to $36 and Coca-Cola's falls to $38, what is the new value og the portfolio, and what return did it earn? After the price change, what are the new portfolio weights?

2. What are the covariance and the correlation of a stock's return with itself? Show calculations.

3. Suppose you have $20 000 in cash to invest. You decide to short sell $10 000 worth of Coca-Cola stock and invest proceeds from your short sale, plus your $20 000, in intel. What is the expected return and volatility of your portfolio? The expected return of intel is 26% and the volatility is 0.50, while for coca cola the expected return is 6% and the volatility is 0.25. Assume that the covariance between the returns of Intel and Coca-Cola is 0.

Reference no: EM132373376

Questions Cloud

Possible implications for official international reserve : Explain your answer, using hypothetical figures for the current and nonreserve financial accounts.
Who benefits and who loses from such a policy : 1. Do you think imposing rent control in a city is an efficient policy? A good policy? Why or why not? 2. Who benefits and who loses from such a policy?
Terms mean within the context of policy modeling : What do the following terms mean within the context of policy modeling? How are all these terms related?
How supply and demand affect the price of a product : Describe how supply and demand affect the price of a product.
Covariance and the correlation of a stock return : What are the covariance and the correlation of a stock's return with itself? Show calculations.
Compute the percentage changes in tickets sold : Compute the percentage changes in (1) tickets sold, (2) ticket revenue, and (3) total revenue from admissions and refreshment sales.
Describe reasons for having totally anonymous : Describe the reasons for having a totally anonymous means of accessing the internet. Please also discuss the dangers of that same internet.
Explain the place of an accounting information system : HA2042 Accounting Information Systems-Holmes Institute- Australia- Prepare a report to the Managing Director to evaluate the processes, risks.
Approximate the market demand curve : If one were to plot price against quantity sold would the resulting relationship approximate the market demand curve? If not, what is it showing?

Reviews

Write a Review

Business Economics Questions & Answers

  Economics assignment

This document contains various important questions and their appropriate answers in the subject field of Economics.

  Demand and supply curves

Economics is the study of the principles governing the allocation of scarce means among competing ends when the objective of the allocation is to maximize the attainment of the ends.

  Long-run perfectly competitive equilibrium for the firm

Evaluate Government intervene and correct this situation?(a) Explain the concept of a concentration ratio. A rise in the price of magarine Explain the impact of external costs and external benefits on resource allocation long-run perfectly c..

  Supply and demand diagrams

Explain each of the following using supply and demand diagrams,  With the use of a graph, explain how these two programs affect cigarette consumption and the price of cigarettes.

  Case study: fisher-price toys

The case study of the Fisher-Price Toys, Inc., a popular case in basic economics and management from the prestigious Harvard Business School.

  Draw the production possibility curve

Draw the production possibility curve and a. Define consumer surplus and producer surplus.

  Tax revenue

The Australian government administers two programs that affect the market for cigarettes

  Maximize total welfare

How many tickets to sell to maximize total welfare.

  Difference between the cv and the ev

The change in consumer surplus (?CS) is not "theoretically" justifiable like the CV and EV but it continues to be the most widely used measure of consumer welfare change. Explain how this can be reconciled

  Depict von neumann-morgenstern utility index u in a diagram

Depict the von Neumann-Morgenstern utility index u in a diagram

  What is the market solution

What is the market solution (market price and quantity) and What is the total surplus of the society under the market solution

  Calculate gross national product and net national product

Calculate gross national product and net national product

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd