Expected return and standard deviation

Assignment Help Financial Management

Reference no: EM13811230

Security A has an expected return of 8%t and a standard deviation of 20%. Security B has an expected return of 10% and a standard deviation of 50%.

a) If you place half of your money in each stock, what is your expected return?

b) If you place 30% of your money in A and the remaining 70% in B, what is your expected return?

c) If the correlation between the returns of Securities A and B above is-0.5, what are the variance and the standard deviation of the returns of each of the two portfolios you found in parts a) and 1 b) above?

Reference no: EM13811230

Questions Cloud

What is the profit-maximizing order-up-to level for cash : Jim is a CFO of a mid-sized construction company. One of his key tasks is to ensure that the company has sufficient cash to pay its daily and hourly workers who are hired whenever need arises. What is the profit-maximizing order-up-to level for cash?

About mergers and acquisitions and taxes : In a statutory merger, only assets and liabilities shown on the target firm’s balance sheet automatically transfer to the acquiring firm. Which of the following is not true about mergers and acquisitions and taxes? Which of the following is not true ..

What is present value of all future earning if interest rate : Analysts predict that your company's earnings will grow at 40% per year for the next five years. After that, earnings growth is expected to slow to 2% per year and continue at that level forever. Your company has announced earnings of $2 million. Wha..

Combination of ratios predict companys long-term viability : Can any ratio or combination of ratios predict a company's long-term viability? Can you think of an example whereby one ratio incorrectly looks "good" only because another ratio is "bad"?

Expected return and standard deviation : Security A has an expected return of 8%t and a standard deviation of 20%. Security B has an expected return of 10% and a standard deviation of 50%. If you place half of your money in each stock, what is your expected return?

Capital structure that consists-common stock-long-term debt : Clark Communications has a capital structure that consists of 70% common stock and 30% long-term debt. In order to calculate Clark's WACC, an analyst has accumulated the following information: The company currently has a 30-year bond issue outstandin..

What is allisons cost of new outside equity capital : Allison Engines Corporation has established a target capital structure of 40% debt and 60% common equity. The current market price of the firm's stock is P0 = $36; its last dividend was D0 = $2.80, and its expected dividend growth rate is 8%. What is..

Assume market is in equilibrium with required return equal : YUM Corp does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect YUM Corp to begin paying dividends, with the 1st dividend of $1.25 coming 3 (three) years from today. The dividend ..

What is the terminal or horizon-value of operations : XYZ Inc has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 9%. The company's weighted average cost of capital is 1..

User Account

All Pages