State probability return, State Probability Return: Stock 1

State probability return

Assignment Help Financial Management

Reference no: EM131056191

State Probability Return: Stock 1 Return: Stock2 Bear .25 -.020 .034 Normal .60 .138 .062 Bull .15 .218 .092 a) Calculate the covariance of return between Stock 1 and Stock 2\ b) Calculate the correlation of return between Stock 1 and Stock 2. c) If you combine Stock 1 and Stock 2 into a portfolio, will you obtain diversification benefits? Why, or why not (be sure to provide quantitative justification for your answer)? d) What is the variance of return for a portfolio that invests 40% of wealth in Stock 1 and 60% in Stock 2.

Reference no: EM131056191

Questions Cloud

Amortization requires montly payents : A $150000 mortgage at 3.5% compounded semi-annually with a 20 year amortization requires montly payents. How much will the amortization period be shortened if a prepayment of $13 000 is made at the end of the fourth year?

Calculate the size of the new montly paymentst : Anne purchased a condo for $275 000. She made 25% down payment and received a mortgage for the rest of the aount at 4.75% compounded semi- a year amortization period. Calculate the size of the new montly paymentst if the mortgage is renewed after 5 y..

Determine the total amount of interest paid : Sherry took out a $70 000 loan amortixed by payemnts of $2200 at the end of every 3 months at 7% compounded quarterly. Counstruct an amortization schedule for the last 2 payments. Determine the total amount paid to settle the loan. Determine the tota..

Determine the principal repaid and interest paid : A $65 000 loan at 4.6 compounded monthly, requires quarterly payments of $1590.65 for 14 years. Determine the principal repaid in the 10th payment. Determin the interest paid in the 7th payment Determine the interest paid in the 7th year.

State probability return : State Probability Return: Stock 1 Return: Stock2 Bear .25 -.020 .034 Normal .60 .138 .062 Bull .15 .218 .092. calculate the covariance of return between Stock 1 and Stock 2\. Calculate the correlation of return between Stock 1 and Stock 2. If you com..

Should the replacement piece of equipment be acquired : Crackle and Pop Telephone Company is considering an upgrade to their current call-waiting equipment. Their existing hardware was purchased 3 years ago for $150,000, has been depreciated straight line over a 5-year useful life. should the replacement..

Costs and expenses are expected to remain unchanged : Vandalay Industries is trying to choose between two alternative (mutually exclusive) machines. Whichever machine is selected will be utilized for the foreseeable future (in addition, for the foreseeable future, all revenues, costs and expenses are ex..

What are the incremental earnings in the second year : CathFoods will release a new range of candies which contain anti-oxidants. New equipment to manufacture the candy will cost $2 million, which will be depreciated by straight-line depreciation over five years. If CathFood's marginal tax rate is 35%, w..

What are incremental earnings in year three of this project : Vernon-Nelson Chemicals is planning to release a new brand of insecticide, Bee-Safe, that will kill many insect pests but not harm useful pollinators. Buying new equipment to manufacture the product will cost $20 million. what are the incremental ear..

User Account

All Pages