Finance Portfolio/weights

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1.value:

6.25 points

What are the portfolio weights for a portfolio that has 154 shares of Stock A that sell for $50 per share and 120 shares of Stock B that sell for $25 per share? (Round your answers to 4 decimal places. (e.g., 32.1616))

Portfolio weights

Stock A

Stock B

2.value:

6.25 points

You own a portfolio that has $3,100 invested in Stock A and $4,100 invested in Stock B. If the expected returns on these stocks are 9 percent and 12 percent, respectively, what is the expected return on the portfolio? (Round your answer to 2 decimal places. (e.g., 32.16))

Portfolio expected return %

3.value:

6.25 points

You own a portfolio that is 32 percent invested in Stock X, 18 percent in Stock Y, and 50 percent in Stock Z. The expected returns on these three stocks are 12 percent, 18 percent, and 14 percent, respectively. What is the expected return on the portfolio? (Round your answer to 2 decimal places. (e.g., 32.16))

Portfolio expected return %

4.value:

6.25 points

You have $26,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 15 percent and Stock Y with an expected return of 11.0 percent. If your goal is to create a portfolio with an expected return of 13.68 percent, how much money will you invest in Stock X and Stock Y?

Amount invested

Stock X $

Stock Y $

5.value:

6.25 points

Consider the following information:

State of Economy Probability of

State of Economy Portfolio Return

if State Occurs

Recession 0.23 − 0.13

Boom 0.77 0.23

Calculate the expected return. (Round your answer to 2 decimal places. (e.g., 32.16))

Expected return %

value:

6.25 points

Consider the following information:

State of Economy	Probability of State of Economy	Portfolio Return if State Occurs
Recession		0.23	−	0.19
Normal		0.48		0.20
Boom		0.29		0.28

Calculate the expected return. (Round your answer to 2 decimal places. (e.g., 32.16))

Expected return

value:

6.25 points

Consider the following information:

		Rate of Return If State Occurs
State of	Probability of
Economy	State of Economy	Stock A	Stock B
Recession		0.15		0.06	−	0.19
Normal		0.60		0.09		0.10
Boom		0.25		0.14		0.27

Calculate the expected return for the two stocks. (Round your answers to 2 decimal places. (e.g., 32.16))

	Expected return
Stock A	%
Stock B	%

Calculate the standard deviation for the two stocks. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

	Standard deviation
Stock A	%
Stock B	%

value:

6.25 points

A portfolio is invested 10 percent in Stock G, 50 percent in Stock J, and 40 percent in Stock K. The expected returns on these stocks are 7 percent, 13 percent, and 15 percent, respectively. What is the portfolio's expected return? (Round your answer to 2 decimal places. (e.g., 32.16))

Portfolio's expected return

value:

6.25 points

Consider the following information:

		Rate of Return if State Occurs
State of	Probability of
Economy	State of Economy	Stock A	Stock B	Stock C
Boom		0.56			0.06	0.14		0.34
Bust		0.44			0.15	0.05	−	0.04

a.	What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Expected return

b.	What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places. (e.g., 32.161616))

Variance

10.

value:

6.25 points

Consider the following information:

		Rate of Return if State Occurs
State of	Probability of
Economy	State of Economy	Stock A	Stock B	Stock C
Boom		0.15			0.33		0.43		0.23
Good		0.55			0.18		0.14		0.12
Poor		0.25		−	0.05	−	0.08	−	0.06
Bust		0.05		−	0.13	−	0.18	−	0.10

a.	Your portfolio is invested 26 percent each in A and C, and 48 percent in B. What is the expected return of the portfolio? (Round your answer to 2 decimal places. (e.g., 32.16))

Expected return

b-1	What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places. (e.g., 32.16161))

Variance

b-2	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	%

11.

value:

6.25 points

You own a stock portfolio invested 35 percent in Stock Q, 30 percent in Stock R, 20 percent in Stock S, and 15 percent in Stock T. The betas for these four stocks are 0.92, 1.25, 1.09, and 1.27, respectively. What is the portfolio beta? (Round your answer to 2 decimal places. (e.g., 32.16))

Portfolio beta

12.

value:

6.25 points

You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.47 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? (Round your answer to 2 decimal places. (e.g., 32.16))

Portfolio beta

13.

value:

6.25 points

A stock has a beta of 1.22, the expected return on the market is 12 percent, and the risk-free rate is 4.0 percent. What must the expected return on this stock be? (Round your answer to 2 decimal places. (e.g., 32.16))

Expected return

14.

value:

6.25 points

A stock has an expected return of 13.5 percent, its beta is 1.45, and the risk-free rate is 6.5 percent. What must the expected return on the market be? (Round your answer to 2 decimal places. (e.g., 32.16))

Market expected return

15.

value:

6.25 points

Consider the following information about Stocks I and II:

		Rate of Return if State Occurs
State of	Probability of
Economy	State of Economy	Stock A	Stock B
Recession		0.26		0.03	−	0.34
Normal		0.56		0.20		0.14
Irrational exuberance		0.18		0.09		0.54

The market risk premium is 5 percent, and the risk-free rate is 3 percent. (Round your answers to 2 decimal places. (e.g., 32.16))

The standard deviation on Stock I's return is _______percent, and the Stock I beta is ______.

The standard deviation on Stock II's return is_______ percent, and the Stock II beta is ______.

16.

value:

6.25 points

Suppose you observe the following situation:

Security	Beta	Expected Return
Pete Corp.		1.55	0.165
Repete Co.		1.24	0.138

Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Expected return on market

What is the risk-free rate? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Risk-free rate