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3. Portfolio Expected Return You own a portfolio t...

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3. Portfolio Expected Return You own a portfolio that is 60 percent invested in Stock X, 25 percent in Stock Y, and 15 percent in Stock Z. The expected returns on these three stocks are 9 percent, 17 percent, and 13 percent, respectively. What is the expected return on the portfolio? 7. Calculating Returns and Standard Deviations Based on the following information, calculate the expected return and standard deviation for the two stocks. State of Probability of Economy State of Economy Stock A Stock B Recession .15 .05 -.17 Normal .65 .08 .12 Boom .20 .13 .29 10. Returns and Standard Deviations Consider the following information: State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .15 .30 .45 .33 Good .45 .12 .10 .15 Poor .35 .01 -.15 -.05 Bust .05 -.06 -.30 -.09 a. Your portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the expected return of the portfolio? b. What is the variance of this portfolio? The standard deviation? 12. Calculating Portfolio Betas You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.38 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? 14. Using CAPM A stock has an expected return of 10.2 percent, the risk-free rate is 4.5 percent, and the market risk premium is 8.5 percent. What must the beta of this stock be?

 

Paper#6922 | Written in 18-Jul-2015

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