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FIN- Correlation Related Multiple Problems

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Question;QuestionQ1Based on the following information:State of EconomyProbability of State of EconomyRate of Returnif State OccursDepression.12?.103Recession.23.061Normal.47.132Boom.18.213Calculate the expected return.(Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))Expected return %Calculate the standard deviation. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))Standard deviation %Q2.Consider the following information:Rate of Return if State OccursState ofProbability ofEconomyState of EconomyStock AStock BStock CBoom.15.37.47.27Good.45.22.18.11Poor.35?.04?.07?.05Bust.05?.18?.22?.08a.Your portfolio is invested 20 percent each in A and C, and 60 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))Expected return %b-1.What is the variance of this portfolio?(Do not round intermediate calculations and round your answer to 5 decimal places. (e.g., 32.16161))Varianceb-2.What is the standard deviation?(Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))Standard deviation %Q3.Stock Y has a beta of 1.8 and an expected return of 18.2 percent. Stock Z has a beta of 0.8 and an expected return of 9.6 percent. If the risk-free rate is 5.2 percent and the market risk premium is 6.7 percent, the reward-to-risk ratios for stocks Y and Z areandpercent, respectively. Since the SML reward-to-risk ispercentQ4. Based on the following information:State ofEconomyReturn onStock AReturn onStock BBear.107?.050Normal.110.153Bull.078.238Assume each state of the economy is equally likely to happen.Calculate the expected return of each of the following stocks.(Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))Expected returnStock A%Stock B%Calculate the standard deviation of each of the following stocks. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))Standard deviationStock A%Stock B%What is the covariance between the returns of the two stocks?(Negative amount should be indicated by a minus sign, Do not round intermediate calculation and round your final answer to 6 decimal places. (e.g., 32.161616))CovarianceWhat is the correlation between the returns of the two stocks?(Negative amount should be indicated by a minus sign, Do not round intermediate calculation round your final answer to 4 decimal places. (e.g., 32.1616))Correlation

 

Paper#49634 | Written in 18-Jul-2015

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