Account question

Sheet1

A portfolio is invested 45 percent in Stock G, 40 percent in Stock J, and 15 percent in Stock K. The expected returns on these stocks are 11 percent, 9 percent, and 15 percent, respectively. What is the portfolio’s expected return?
Input area:
Weight of G	0.45
Weight of J	0.4
Weight of K	0.15
Stock G E(R)	11.00%
Stock J E(R)	9.00%
Stock K E(R)	15.00%
(Use cells A6 to B11 from the given information to complete this question.)
Output area:
Portfolio E(R)
Students: The scratchpad area is for you to do any additional work you need to solve this question or can be used to show your work.
Nothing in this area will be graded, but it will be submitted with your assignment.						For an answer to be graded as correct, you must use an Excel formula:
						1. Begin each formula with an = sign.
						2. Reference cells, instead of entering values.
						Example: =B3+C3

Sheet1

You own a stock portfolio invested 15 percent in Stock Q, 20 percent in Stock R, 30 percent in Stock S, and 35 percent in Stock T. The betas for these four stocks are .79, 1.23, 1.13, and 1.36, respectively. What is the portfolio beta?
Input area:
Weight of Q	0.15
Weight of R	0.2
Weight of S	0.3
Weight of T	0.35
Beta of Q	0.79
Beta of R	1.23
Beta of S	1.13
Beta of T	1.36
(Use cells A6 to B13 from the given information to complete this question.)
Output area:
Portfolio beta
Students: The scratchpad area is for you to do any additional work you need to solve this question or can be used to show your work.
Nothing in this area will be graded, but it will be submitted with your assignment.							For an answer to be graded as correct, you must use an Excel formula:
							1. Begin each formula with an = sign.
							2. Reference cells, instead of entering values.
							Example: =B3+C3

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A1

Sheet1

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Returns and standard deviations - Excel

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References

Excel Simulation Difficulty: 1 Basic

Consider the following information:

Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Recession 0.20 0.04 -0.18 Normal 0.70 0.09 0.15 Boom 0.10 0.13 0.36

Required: (a) Calculate the expected return for Stock A. (Do not round your intermediate calculations.)

(Click to select)

(b) Calculate the expected return for Stock B. (Do not round your intermediate calculations.)

(Click to select)

(c)Calculate the standard deviation for Stock A. (Do not round your intermediate calculations.)

(Click to select)

(d)Calculate the standard deviation for Stock B. (Do not round your intermediate calculations.)

(Click to select)

rev: 09_20_2012

References

Worksheet Learning Objective: 13-01 How to calculate expected returns.

Difficulty: Basic Section: 13.1 Expected Returns and Variances

Consider the following information:

Rate of Return if State Occurs

State of Economy Probability of

State of Economy Stock A Stock B Stock C Boom .15 .33 .43 .34 Good .50 .20 .14 .08 Poor .30 –.01 –.09 –.03 Bust .05 –.17 –.29 –.10

Requirement 1: Your portfolio is invested 32 percent each in A and C, and 36 percent in B. What is the expected return of the portfolio? (Do not round your intermediate calculations.)

(Click to select)

Requirement 2: (a) What is the variance of this portfolio? (Do not round your intermediate calculations.)

(Click to select)

(b) What is the standard deviation? (Do not round your intermediate calculations.)

(Click to select)

rev: 09_20_2012, 01_15_2013; 09_29_2015_QC_CS-21155

References

Worksheet

Difficulty: Basic

A portfolio has 90 shares of Stock A that sell for $40 per share and 105 shares of Stock B that sell for $31 per share.

Required: (a) What is the portfolio weight of Stock A?

(Click to select)

(b) What is the portfolio weight of Stock B?

(Click to select)

rev: 09_20_2012

References

Worksheet Learning Objective: 13-01 How to calculate expected returns.

Difficulty: Basic Section: 13.2 Portfolios

You own a portfolio that has $1,800 invested in Stock A and $3,650 invested in Stock B. If the expected returns on these stocks are 8 percent and 16 percent, respectively, what is the expected return on the portfolio?(Do not round your intermediate calculations.)

rev: 09_20_2012

13.36%

14.03%

12.00%

13.62%

10.64%

References

Multiple Choice Learning Objective: 13-01 How to calculate expected returns.

Difficulty: Basic Section: 13.2 Portfolios

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You have $20,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 6 percent.

Required: (a)If your goal is to create a portfolio with an expected return of 10.5 percent, how much money will you

invest in Stock X?

(Click to select)

(b)If your goal is to create a portfolio with an expected return of 10.5 percent, how much money will you invest in Stock Y?

(Click to select)

rev: 09_20_2012

References

Worksheet Learning Objective: 13-01 How to calculate expected returns.

Difficulty: Basic Section: 13.2 Portfolios

You own a stock portfolio invested 15 percent in Stock Q, 15 percent in Stock R, 10 percent in Stock S, and 60 percent in Stock T. The betas for these four stocks are 0.85, 1.45, 1.42, and 0.71, respectively. What is the portfolio beta?

rev: 09_20_2012

0.89

0.93

0.87

0.91

0.96

References

Multiple Choice Learning Objective: 13-04 The security market line and the risk- return trade-off.

Difficulty: Basic Section: 13.6 Systematic Risk and Beta

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A stock has a beta of 1.7, the expected return on the market is 16 percent, and the risk-free rate is 8 percent. What must the expected return on this stock be?

rev: 09_20_2012

20.52%

22.46%

22.68%

21.6%

35.2%

References

Multiple Choice Learning Objective: 13-04 The security market line and the risk- return trade-off.

Difficulty: Basic Section: 13.7 The Security Market Line

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The common stock of Jensen Shipping has an expected return of 8.25 percent. The  market risk-premium is 7.00 percent and the risk-free return is 3.00 percent. What is the beta of this stock?

0.15

1.212

0.95

1.512

0.75

References

Multiple Choice Learning Objective: 13-04 The security market line and the risk- return trade-off.

Difficulty: Basic Section: 13.7 The Security Market Line

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You want to create a portfolio equally as risky as the market, and you have $1,000,000 to invest. You've already allocated a portion of your wealth to Stock A and Stock B, and you've decided to also invest money in Stock C and the risk-free asset. Consider the following information:

Asset Investment Beta Stock A $200,000 0.80 Stock B $200,000 1.30 Stock C ? 1.50 Risk-free asset ? ?

Required: (a) How much should you invest in Stock C? (Do not round your intermediate calculations.)

(Click to select)

(b)How much should you invest in the risk-free asset? (Do not round your intermediate calculations.)

(Click to select)

rev: 09_20_2012

References

Worksheet Learning Objective: 13-02 The impact of diversification.

Difficulty: Intermediate Section: 13.6 Systematic Risk and Beta

The common stock of Jensen Shipping has a risk premium of 14.40 percent.  What is the market risk-premium if the company's beta is 1.6? What is expected return on the market if the risk-free return is 2.00 percent?

Risk premium is 9.75 percent; Market expected return is 7.75 percent

Risk premium is 23.04 percent; Market expected return is 25.04 percent

Risk premium is 8.70 percent; Market expected return is 6.70 percent

Risk premium is 9.50 percent; Market expected return is 7.50 percent

Risk premium is 9.00 percent; Market expected return is 11.00 percent

References

Multiple Choice

Difficulty: Basic

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