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Problem 11-22 Portfolio Returns and Deviations Consider the following information about three stocks: Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .30 .20 .25 .60 Normal .45 .15 .11 .05 Bust .25 .01 − .15 − .50 a-1. If your portfolio is invested 40 percent each in A and B and 20 percent in C , what is the portfolio expected return? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16)) Portfolio expected return % a-2. What is the variance? (Do not round intermediate calculations and round your final answer to 5 decimal places. (e.g., 32.16161)) Variance a-3. What is the standard deviation? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Standard deviation % b. If the expected T-bill rate is 3.80 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Expected risk premium % c-1. If the expected inflation rate is 3.50 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and round your answers to 2 decimal places. (e.g., 32.16)) Approximate expected real return % Exact expected real return % c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and round your answers to 2 decimal places. (e.g., 32.16)) Approximate expected real risk premium % Exact expected real risk premium %
Suppose the gold spot price is $1700/oz, the 1-year forward price is 1760.54, and the continuously compounded risk-free rate is 4%. Calculate the following: the lease rate δ= 1T 1n F0,TS B. the return on a cash-and-carry if gold cannot be loaned C. t..
Lakonishok Equipment has an investment opportunity in Europe. The project costs €12 million and is expected to produce cash flows of €1.8 million in Year 1, €2.6 million in Year 2, and €3.5 million in Year 3. The current spot exchange rate is $1.36/€..
1. why are many governments in todays world liberalizing cross-border movements of goods services and resources?2.
complete the external environmental scan for your organization.nbspperform an internal competitive environmental scan
A small consulting engineering company bought an office building for $910,000. The company has eleven engineers and eight support staff. Monthly expenses for for salaries, utilities, grounds maintenance, etc., are $108,000. Use an average billing rat..
A speculator can choose between buying 600 shares of a stock for $40 per share and buying 1600 European call options on the stock with a strike price of $45 for $4 per option. For second alternative to give a better outcome at the option maturity, th..
Develop a spreadsheet for opening a UPS store franchise that forecasts profits, revenues, and costs using the cost model. Be sure to include all assumptions that you made as you developed your forecasts. In addition, you should include a breakdown of..
What is the value of any productive asset based on (equal to)? What cost figure should Wal-Smart Technology use as the relevant cost of the new plant?
State of economy probability of state of economy rate of return stock A Rate of return stock B. calculate expected return for the two stocks. calculate the standard deviation for the two stocks
You have $51,501.70 in a brokerage account, and you plan to deposit an additional $7,500 at the end of every future year until your account totals $425,000. You expect to earn 8.4% annually on the account. How many years will it take to reach your go..
Cooper Commons is considering purchasing new, technologically advanced solar panels. The equipment will cost $625,000 with a salvage value of $50,000 at the end of its useful life of 10 years. The excess electricity from the panels will be sold back ..
The beta of M Simon Inc., stock is 1.7, whereas the risk-free rate of return is 0.08. If the expected return on the market is 0.14, then what is the expected return on M Simon Inc?
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