Determine the expected portfolio return

Assignment Help Financial Accounting

Reference no: EM133311

Question :

Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L can represent 40% of the dollar value of the portfolio, and stock M will account for the other 60 percent. The expected returns over the next 6 years, 2013-2018, for each of these stocks are given in the subsequent table.

Year Stock L expected return Stock M expected return

2013 14% 20%

2014 14% 18%

2015 16% 16%

2016 17% 14%

2017 17% 12%

2018 19% 10%

a. Determine the expected portfolio return, rp, for each of the 6 years.

b. Evaluate the expected value of portfolio returns, rp, (line over the r) over the 6-year period.

c. Determine the standard deviation of expected portfolio returns, orp, over the 6-year period.

d. How could you characterize the correlation of returns of the two stocks L and M?

e. Show any benefits of diversification achieved by Jamie through creation of the portfolio.

Reference no: EM133311

Questions Cloud

Cyber weapon : Single Sign On (SSO), Single Sign On (SSO), netstat -an, arp -a, ipconfig /displaydns, MS Config. Means, MS Config. Means, network reconnaissance

Dos and ddos attack : Denial of Service attack (DoS) and Distributed Denial of service (DDoS) attack, two-factor authentication system, password ageing, biometric devic, cryptographic attack made Double DES (2DES), Demilitarized Zone (DMZ), SSL protocols

What is the standard error : If you have five critical errors, two main faults, and five minor errors, what is the standard error

Determine the expected portfolio return : Determine the expected portfolio return, rp, for each of the 6 years. Evaluate the expected value of portfolio returns, rp, (line over the r) over the 6-year period

Federal income tax return : Use the given information to complete Phillip and Claire Dunphy's 2012 federal income tax return.

Evaluate the operating costs : All operating costs are variable as a percentage of total sales.

What should be the required initial investment : What should be the required initial investment at the starting of the first year if the fund earns 11%?

Recognize the impact of this stock transaction : What journal entry could Albuquerque make to recognize the impact of this stock transaction?

User Account

All Pages