What is the average return on the portfolio

Reference no: EM132851155

Question 1

Security Amount invested (in Php) Average Return Beta
R 23,000 12% 0.5
S 30,000 15% 1.2
T 47,000 18% 1.9

a.) What is the average return on the portfolio?

b.) If the nominal risk free rate is 2% and the return on the market is 10%, what is the required return on the portfolio?

Question 2. Security A has an expected return of 12.4% with a standard deviation of 15% and a correlation coefficient with the market of 0.85. Security B has an expected return of -0.73% with a standard deviation of 20% and a correlation coefficient with the market of -0.67. The standard deviation of rm is 12%.

a.) What are the beta coefficients of Securities A and B?

b.) If the risk-free rate is 6%, what is the value of rm?

Question 3. Arabella has Php 1,000,000 which she invested in a portfolio that comprises of only 2 stocks: Stock J and Stock K. Php 300,000 is invested in Stock J while the rest is invested in Stock K.

State of Economy Stock J Stock K
Poor 10% (5%)
Normal 4% 6%
Excellent (1%) 12^

a.) What is the expected return of Stock J?

b.) What is the variance of Stock K?

c. What is the coefficient of variation for Stock K?

d. If Arabella can only invest in 1 stock, which stock should she invest in and why?

e.) What is the covariance between Stock J and Stock K?

f.) What is the correlation coefficient between Stock J and Stock K?

g.) What is the portfolio standard deviation?

h.) What is the coefficient of determination?

Question 4. 60% of a portfolio is invested in Stock S and 40% is invested in Stock T, and given below are the returns of the two-stock portfolio for 3 years:

Years Stock S Stock T
2014 15.30% (6.37%)
2015 (8.75%) 11.20%
2016 10.00% 3.65%

a.) What is the average return of Stock T?

b. What is the variance of stock S?

c. What is the standard deviation of Stock T?

d.) What is the correlation coefficient between Stock S and Stock T?

e.) What is the portfolio average returns?

f.) What is portfolio coefficient of variation?

Question 5. Given the following returns on "the market" and Stock Q during the last three years.

Year Market Stock Q
1 6.10% 6.50%
2 12.90% -3.70%
3 16.20% 21.71%

a.) What is the Beta of Stock Q?

b.) What is the predicted value of the Stock Q in Year 4, if the Market return in Year 4 is 18.50%?

Reference no: EM132851155

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