Compute the expected return and standard deviation, Financial Management

Assignment Help:

Question:

Consider the following information:

 

Stock A

Stock B

Beta

0.8

1.4

Share price, $

20

40

Standard deviation

25%

50%

Correlation between A and B

0.25

Treasury bills currently yield 2%, and the market risk premium is 6%.

(a) Compute the expected return and standard deviation of a portfolio of 100 shares of Stock A and 100 shares of Stock B.

(b) Ajay has $10,000 to invest.  He plans to invest $4,000 in Stock B.  He will allocate the rest of his money to Treasury bills and Stock A.  His goal is to construct a portfolio with a beta of 1.0.  Compute the investment amounts (in dollars) in Treasury bills and Stock A required to achieve the goal.


Related Discussions:- Compute the expected return and standard deviation

Credit limit decision-bajaj electronics company case study , how would you ...

how would you judge the potential profit of bajaj electronics on the first year of sales to booth plastics and give your suggestion regarding credit limit.Should it be approved or

Dividend policy, the managing directors of three profitable listed companie...

the managing directors of three profitable listed companies discussed their company''''s dividend policies. company A has deliberately paid no dividends for the past five years. co

Evaluation of credit policy, Q. What is Evaluation of Credit Policy? Ev...

Q. What is Evaluation of Credit Policy? Evaluation of Credit Policy: - A credit policy is prepared to maintain the investment in receivables at optimum level. Receivable Turnov

Business, Ken started college at the age of 18 with $63,450 already saved, ...

Ken started college at the age of 18 with $63,450 already saved, because 18 years ago his saving account 7.25 per year.

Weighted average cost of capital , I need report on Weighted Average Cost o...

I need report on Weighted Average Cost of Capital. Do you provide help in topic Weighted Average Cost of Capital? I need expert's assistance to solve my college assignment. Please

Constructing index numbers, Constructing Index Numbers There are two a...

Constructing Index Numbers There are two approaches for constructing an index number namely the aggregates method and average of relatives method. The index constructed in eit

Describe the money market products, Question 1 Under a hire purchase de...

Question 1 Under a hire purchase deal structured by X Finance Ltd. for Y Corporation, the finance company has offered to finance the purchase of equipment that costs Rs. 200 la

Second-round financing, Second-Round Financing This is the introduction...

Second-Round Financing This is the introduction of further funding through original investors or new investors to enable a new organization to deal with finance growth or unexp

Define multinational corporations (mncs), What are multinational corporatio...

What are multinational corporations (MNCs) and what economic roles do they play? A multinational corporation (MNC) can be described as a business firm incorporated in one count

Trading Options, TRADING IN OPTIONS We have already seen that options a...

TRADING IN OPTIONS We have already seen that options are traded on exchanges and have already discussed how to understand published quotations. Let us now learn the trading mec

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd