User Account

All Pages

Calculate standard deviation of returns for each stock

Assignment Help Financial Management
Reference no: EM131276750

Describe the relationship between risk and return

Question (1):

Assume a two-stock portfolio with $40,000 invested in company X and $60,000 invested in company Z.

 

 

Estimated Return

Economy

Probability

X(ri)

Z(ri)

Portfolio(ri)

Strong

0.30

15%

25%

12%

Normal

0.50

10%

13%

10%

Weak

0.20

-8%

-15%

-7%

Total

1.00

 

 

 

1. Calculate the expected rate of return for each stock separately.

2. Calculate the expected rate of return for the portfolio.

3. Calculate the standard deviation (s) of returns for each stock separately.

4. Calculate the standard deviation (s) of returns for the portfolio.

5. Was investing in the previous portfolio helpful to decrease the risk of investing in each stock separately? Explain.

Verified Expert

This assignment deals with risk and return analysis for individual stocks vis-a-vis portfolio investment. It requires calculating the expected return on individual stock investments as well as the standard deviation of returns to measure the associated risk. Further, the same is compared to the expected return and standard deviation of a portfolio in order to analyse the risk differential between the two.

Reference no: EM131276750

Questions Cloud

Why you support or oppose adding the proposed equal rights : Write a 200 to 500 word explanation of why you support or oppose adding the proposed Equal Rights Amendment to Constitution. Make sure that you include some discussion of 14th Amendment levels of scrutiny in your explanation.
Does one store seem to be more trend right than the other : Does one store seem to be more "trend-right" than the other? What is the mix of staple, fashion or fad merchandise in each retailer?
Create paper on laws that protect sexual harassment victims : Create a 2 page paper on the LAWS THAT PROTECT SEXUAL HARASSMENT VICTIMS. In text citations, APA format and And references.
Compare leadership cultures between two organizations : Compare and contrast leadership cultures and human resource strategies between two organizations by writing a 3-5 page paper.
Calculate standard deviation of returns for each stock : BAF 301 - Introduction to Financial Management Calculate the expected rate of return for each stock separately and calculate the expected rate of return for the portfolio and calculate the standard deviation (s) of returns for each stock separately.
Identify a culture to which you belong : Identify a culture to which you belong.- who is in your culture? What beliefs, values, attitudes are central to your culture?
Internal factors influencing the organization : Internal Factors Influencing the Organization. External Factors Influencing the Organization. Current and Projected Future Demographics of the Employee Base.
Determine the mean effective pressure : An ideal diesel engine has a compression ratio of 20 and uses air as the working fluid. The state of air at the beginning of the compression process is 95 kPa and 208°C.
Identify 3 cultural values held by members of that culture : Why is it important for us to be aware of other cultures and their cultural values?-  Have you had experience interacting with individuals from other cultures?

Reviews

Write a Review

Financial Management Questions & Answers

  Build a threshold model for the st series

Perform some nonlinearity tests and draw the conclusion using the 5% significance level- Build a threshold model for the st series and check the fitted model.

  What is the investments profitability index

Your firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. The discount rate that your firm uses for projects of this type..

  Corporate income tax rate-dividend to grow at constant rate

Refer to Lancaster Engineering Inc. (LEI) information below, what is LEI’s weighted average cost of capital (WACC)? LEI’s corporate income tax rate is 40%. Investors expect LEI’s dividend to grow at a constant rate of 9% in the future. LEI has just p..

  How much can the government expect to receive per bond

Suppose the equity market premium is 0.04 and a security with a beta of +1.5 has an equilibrium expected rate of return of 0.10. If the government wishes to issue risk-free zero-coupon bonds with a term to maturity of one period and a face value per ..

  Audit procedure that involves cost-benefit tradeoffs

An internal auditor must weigh the cost of an audit procedure against the persuasiveness of the evidence to be gathered. Observation is one audit procedure that involves cost-benefit tradeoffs. Which of the following statements regarding observation ..

  Depreciating the factory straight line over its useful life

Your company has just agreed to sell one of its factories for 8,200,000. You built the factory for 5,000,000 2 years ago. You have been depreciating the factory straight line over its useful life of 10 years. If the tax rate is 40%, what will your ca..

  Capitated environment versus fee-for-service environment

What are the critical differences in prot analysis when conducted in a capitated environment versus a fee-for-service environment? What cost structure is best when a provider is capitated? Explain.

  Certificate of deposit matures

Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures?

  Cash flows except the initial cost are end of year cash flow

You are asked to determine the optimal economic life of the following project. It has an engineering or physical life of 4 years. The cost of capital is 8% and all cash flows except the initial cost are end of year cash flows.

  How much money will you have in your account in six years

If you invest $820 today at an interest rate of 8.81 percent compounded daily, how much money will you have in your account in six years? Round the answer to two decimal places.

  What is the value of this annuity nine years and seven years

A 9-year annuity of 18 $8,800 semiannual payments will begin 10.5 years from now, with the first payment coming 11 years from now. If the discount rate is 12 percent compounded semiannually, what is the value of this annuity nine years and seven year..

  What is the current yield and interpret the current yield

Wilson Wonders’ bonds have 12 years remaining to maturity. Interest is paid semiannually, the bonds have $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. a. What is the yield to maturity for this bond? b. What..

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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