Expected returns and standard deviations of stocks

Assignment Help Financial Management

Reference no: EM131182577

Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .096, E(RB) = .156, σA = .366, and σB = .626.

a-1. Calculate the expected return of a portfolio that is composed of 41 percent Stock A and 59 percent Stock B when the correlation between the returns on A and B is .56. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return %

a-2. Calculate the standard deviation of a portfolio that is composed of 41 percent Stock A and 59 percent Stock B when the correlation between the returns on A and B is .56. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Standard deviation %

b. Calculate the standard deviation of a portfolio with the same portfolio weights as in part (a) when the correlation coefficient between the returns on Stocks A and B is −.56. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Standard deviation %

Reference no: EM131182577

Questions Cloud

Maturity risk premium on two year treasury security : A 2-year Treasury security currently earns 1.99 percent. Over the next two years, the real interest rate is expected to be 1.00 percent per year and the inflation premium is expected to be 0.70 percent per year. Calculate the maturity risk premium on..

What is the current market value of one of these bonds : The Maryland Department of Transportation has issued 25-year bonds that make semiannual coupon payments at a rate of 10.175 percent. The current market rate for similar securities is 10.1 percent. Assume that the face value of the bond is $1,000. Wha..

What yield to maturity and effective annual yield : Ruth Hornsby is looking to invest in a three-year bond that makes semiannual coupon payments at a rate of 5.625 percent. If these bonds have a market price of $980.13, what yield to maturity and effective annual yield can she expect to earn?

What is the investments profitability index : Your firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. The discount rate that your firm uses for projects of this type..

Expected returns and standard deviations of stocks : Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = .096, E(RB) = .156, σA = .366, and σB = .626. alculate the expected return of a portfolio that is composed of 41 percent Stock A and 59 percent Stock B when the correl..

Received the data for the monthly payroll : Record the month payroll. Direct labor payroll has already been recorded, as it was incurred in January. Debit other salary expense accounts for the appropriate amounts, credit FWT payable for 15% of gross pay, Credit Fica tax payambel for 7.65% of g..

Analyzing the cost of debt for a firm : You are analyzing the cost of debt for a firm. You know that the firm’s 14-year maturity, 7.0 percent coupon bonds are selling at a price of $653.03. The bonds pay interest semiannually. If these bonds are the only debt outstanding for the firm, answ..

Calculate the annual payment on the loan : Golf Course installing a new Automatic Sprinkler System The eighteen-hole Redwood Golf Course is in need of a new sprinkler system, which is estimated to cost $1 million. Calculate the annual payment on the loan. Calculate the payback period on the p..

What are the expected cash collections in months : Here is a forecast of sales by National Bromide for the first 4 months of 2015 (figures in thousands of dollars): Month: 1 2 3 4 Cash sales 23 32 26 22 Credit sales 140 160 130 110 On average, 50% of credit sales are paid for in the current month, 30..

User Account

All Pages