Computing portfolio expected return and standard deviation

Assignment Help Finance Basics
Reference no: EM1366533

2. Please consider the following stocks:

Price per Expected Standard
Stock Share Return Deviation Correlation
A $25 0.06 0.20 With B = 0.20
B $50 0.08 0.10 With C = 0.45
C $25 0.15 0.15 With A = 0.60

An investor has a $10,000 portfolio that allocated as given: short 100 shares of stock A, purchase 250 shares of B and 200 shares of 3. Any additional funds are lent at risk free rate of 0.04.

a. Compute the portfolio's expected return and standard deviation.
b. Stock B can be replaced with one of two stocks : Stock D - expected return 0.15, standard deviation of 0.15 and zero correlation with all other stocks. Stocks E - also has zero correlation with all other stock while it has an expected return of 0.09 and a standard deviation of 0.11. Would you recommend a replacement for stock B and which of the possible replacements would you choose?


Reference no: EM1366533

Previous Q& A

  Managers ability to function as a contingency leader

How would a manager know which variables in a given situation should influence which approach to leadership he or she should take? Identify a personality trait that you think would help a manager function as a contingency leader.

  Current regulations and oversights

The current regulations and oversights that exist in the United States today.

  Supernormal and negative growth

Finley Corporation is increasing quickly. Dividends are expected to increase at 25% rate for the next three years, with a growth rate falling off to a constant 6% thereafter

  Accomplishing a new or non-routine task

Think about a time when you were required to accomplish a new or non-routine task at work that had the potential to cause injury or illness.

  Show the annotated bibliography

identify four components that must be in each annotated bibliography what would they be

  Effect of market shocks on equilibrium quantity and price

Briefly discuss whether this problem provides enough information to determine whether the equilibrium price and quantity of trucks increased or decreased.

  Performance of healthcare organizations

Four "big ideas" which represent great opportunities to enhance the performance of healthcare organizations are Total Quality management, Customer Relationship management, the internet and teh virtual teaming.

  Classification of cost allocation

ABC Hospital laundry section cleans laboratory jackets for housekeeping and laboratory departments. The budgeted volume of jackets was 100 for housekeeping & 200 for laboratory.

  Question about probabilty and randomness

A salesperson has been losing 25% of potential sales. In a study of 20 random sales contacts from this salesperson, what is the probability of finding 4 or more successful sales?

  Explain size of new working set system designers

Suppose a process changes its locality and size of new working set is too large to be stored into available free memory. What are some options system designers could choose from to handle this situation?


Write a Review


Similar Q& A

  Financial analysis toolbox portfolio project

Financial Analysis Toolbox (Portfolio Project) - This toolbox consists of a listing and representative examples of techniques used in the course to make meaningful financial decisions.

  Calculate selling price on the margins provided

As the Marketing Manager for the Zig brand of microwave ovens in a large customer products company you must answer questions found below with following financial data regarding product.

  Determine cost of capital expansion

Kauai Surf Boards seeking raise capital a large group investors expand operations. Assume investors S&P 500 portfolio, a volatility 15 percent expected return 10 percent.

  Wellpoint and anthem merger

Describe the transaction structure, mode of payment, and financing.

  Future value and present value

Need help with the following. Can you please show me how to answer the questions at the end of this reading for future value and present value. How much will tuition and living expenses be per year when Brady is ready to attend? Give an answer for ea..

  Prepare a schedule to show amount of annual prior service

Sunny Incorporated amended its pension plan which caused an rise of $4,800,000 in its projected benefit obligation. The corporation has 400 employees who are expected to receive benefits under the corporation's defined benefit pension plan.

  Changes in retained earnings

The statement of changes in retained earnings for the year shows:

  Computation of npv of lump sum future receipt

Computation of NPV of lump sum future receipt and annuity receipts also How much should Mr. & Mrs. Smith deposit now in a bank account paying 9 percent to reach financial happiness during retirement

  Esop investments

Emily, age 58, has been a participant in the Icon, Inc. ESOP for 15 years. She plans to retire at age 65.  How much must Icon allow Emily to diversify this year?

  Systemic and unsystemic events

Classify the following events as mostly systematic or mostly unsystematic and tell us why. Is the distinction clear in each case?

  Discuss the social responsibilities of home depot

Discuss briefly the social responsibilities of Home Depot.

  Current yield of cost of preferred stock

The Meredith Company issued $100 par value preferred stock ten years ago. The stock provided an 8% yield at the time of issue. The preferred stock is now selling for $75.

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