Reference no: EM13807330
Stock X has an expected return of 8% and Stock Z has an expected return of 12%. The standard deviation of the expected return is 10% for both stocks. Assume that these are the only two stocks available in a hypothetical world.
A) If the correlation between the returns of the two stocks is +1:
-What is the expected return and standard deviation of a portfolio containing 50% X and 50% Z?
-Does this portfolio offer any benefits of diversification (if the correlation is +1)? How do you know?
-Will any investor include Stock X in his or her portfolio? Explain why or why not.
B) If the correlation between the returns of the two stocks is +0.3:
-What is the expected return and standard deviation of a portfolio containing 50% X and 50% Z?
-Does this portfolio offer any benefits of diversification (if the correlation is +0.3)? How do you know?
-Will any investor include Stock X in his or her portfolio (if the correlation is +0.3)? Explain why or why not.
C) Can diversification offer benefits to investors if the correlation between stocks is positive?
|
Coupon rate-What is the current bond price
: Great Wall Pizzeria issued 11-year bonds one year ago at a coupon rate of 6.8 percent. If the YTM on these bonds is 9 percent, what is the current bond price?
|
|
Zero coupon bonds on the market
: Atlantis Fisheries issues zero coupon bonds on the market at a price of $489 per bond. These are callable in 6 years at a call price of $580. Using semi annual compounding, what is the yield to call for these bonds?
|
|
What is the price and bond equivalent yield
: A Treasury bill that settles on May 18, 2012, pays $100,000 on August 21, 2012. Assuming a discount rate of 5.41 percent, what is the price and bond equivalent yield?
|
|
For each piecewise linear function graph the function
: For each piecewise linear function graph the function and find: lim f(x) lim f(x) lim f(x) x->4- x->4+ x->4 (a) f(x) = { x-2 if x =4 (b) f)x)= ( 2 if x =3
|
|
What is expected return and standard deviation of portfolio
: Stock X has an expected return of 8% and Stock Z has an expected return of 12%. The standard deviation of the expected return is 10% for both stocks. Assume that these are the only two stocks available in a hypothetical world. What is the expected re..
|
|
What is the price of the bond
: A bond with 20 years until maturity has a coupon rate of 7.4 percent and a yield to maturity of 7.5 percent. What is the price of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your resp..
|
|
Present value of the expected future stream of dividends
: In 1965, Warren Buffett acquired control of a New England textile business called Berkshire Hathaway for about $10 a share. Today the stock sells for around $120,000 a share and Mr. Buffett is the wealthiest person in the United States. The stock has..
|
|
Contracts in the dow futures
: You have taken a short position of 3 contracts in the Dow futures (trade $10 times the index) at a price of 16,300. The initial margin is $6,500 and the maintenance margin is $5,200 for the contract. At the time you entered the position you had equit..
|
|
A marketing director for a mexican taco restaurant
: A marketing director for a Mexican Taco Restaurant located in Lynchburg, VA. The average order size of your customers is $7.00 per order. That means that when all your food orders are divided by your total number of customers, the average order amou..
|