Reference no: EM13202300
1) The expected return of Security A is 10% with a standard deviation of 20%. The expected return of Security B is 15% with a standard deviation of 30%. Securities A and B have a correlation of 0.3. The market return is 12% with a standard deviation of 18% and the risk free rate is 3.5%. What is the Sharpe ratio of a portfolio if 40% of the portfolio is in Security A and the remainder in Security B?
2) The current price of Stock Y is $50. It is expected that the stock will pay 4 quarterly dividends of $0.25 each and sell for $52 in one year. The risk-free rate is 3.5%. The expected return on the market portfolio is 12% with a standard deviation of 18%. Assume the market is in equilibrium. What is the beta of Stock Y?
3) The market expected return is 8% with a standard deviation of 18%. The risk free rate is 3.5%. Security XYZ has just paid a dividend of $5 and has a current price of $80. What is the beta of Security XYZ if its dividend is expected to grow at 2% per year indefinitely?
4)The income yield and capital gain yield of a stock are 6% and 5%, respectively. The stock paid a quarterly dividend of $1.5 per share during the year. What should the stock sell for today?
5) Suppose you plan to create a portfolio with two securities: A and B. A has an expected return of 35% with a standard deviation of 22%. B has an expected return of 20% with a standard deviation of 9%. The correlation between the returns of these two securities is perfectly negative. What percentage of your investment should be in A to make the portfolio risk free?
What would be the expected return on the portfolio?
6) Suppose you own a two-security portfolio. You have 54% of your money invested in Security X and the remainder in Security Y. The standard deviations of Securities X and Y are 30 percent and 25 percent. What is the correlation between the two securities if the portfolio standard deviation is 0.1414?
7) Stock A: expected return= 10%; standard deviation= 40%
Stock B: expected return= 20%; standard deviation= 23%
You short sold 200 shares of A at 15 $ per share and purchased 500 shares of B at 15$ per share. The correlation between securities is -0.32. What is the standard deviation of the portfolio?