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##### FIN- Correlation Related Multiple Problems

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Question;Q1Based on the;following information;State of Economy;Probability of;State of Economy;Rate of Return;if State Occurs;Depression;.12;?.103;Recession;.23;.061;Normal;.47;.132;Boom;.18;.213;Calculate 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 Occurs;State of;Probability of;Economy;State of Economy;Stock A;Stock B;Stock C;Boom;.15;.37;.47;.27;Good;.45;.22;.18;.11;Poor;.35;?;.04;?;.07;?;.05;Bust;.05;?;.18;?;.22;?;.08;a.;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));Variance;b-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 ispercent;Q4. Based on the;following information;State of;Economy;Return on;Stock A;Return on;Stock B;Bear;.107;?.050;Normal;.110;.153;Bull;.078;.238;Assume 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 return;Stock 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 deviation;Stock 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));Covariance;What 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#50130 | Written in 18-Jul-2015

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