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Question 1.
You have the following rates of return for a risky portfolio for several recent years. Assume that the stock pays no dividends.
- What is the geometric average return (rG) for the period?
Year
Beginning, of
Year Price
= of shares
bought or sold
2008 550.00 100 bought
2009 555.00 50 bought
2010 451.00 75 sold
2011 554.00 75 sold
Question 2.
Use the following scenario analysis for stocks X and Y to answer the questions below:
Bear Market
Normal Market
Bull Market
Probability
0.2
0.5
0.3
Stock X
-20%
18%
50%
Stock Y
-15%
20%
10%
1. What are the expected returns for stock X and Y?
2. What are the standard deviations of returns on stocks X and Y?
3. Assume that of your $10,000 portfolio, you invest $9,000 in stock X and $1,000 in stock Y. What is the expected return on your portfolio?
Verified Expert
"The assignment involved a detailed discussion of valuation of shares under differential growth of dividends, calculation of returns for particula years and geometric returns and portfolio returns . The analysis involved answering our different questions and the paper is prepared in Microsoft word with Harvard referencing".
re calculate these??? Variance of X = .2 (-.20-.20)^2 + .5 (.18-.20)^2 + .3 (.5-.20)^2 = .2 (.16) + .5 (.04) + .3(.09) = .032 +.02 + .027 = .079 Standard deviation of X = .079^1/2 = .2810 = 28.10% ------------------------------------------------------------------- Return for 2009 = (55-50)/50*100 = 10% Return for 2010 = (51-55)/55*100 = -7.27% Return for 2011 = (54-51)/51*100 = 7.843% Geometric return for 3 years = Geometric return for the 3 years is 3.23% approx. Am grateful for the expertsmind team, they are doing a great job, helping students like me to get good grades tackling such difficult assignments. They should continue such good work to carry students along with them in the area of tutoring. thanks
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