finance

1. An investor is trying to assess the likely return from a stock he is considering to invest. He polls with 3 analysts, who indicate the likely returns over the investment horizon and the corresponding probabilities (given in table below).

Returns % Probability %

10 45

15 30

20 25

Calculate the Expected Return (Average).

Give your answer to 2 digits. Do not indicate % in your answer.

2. Continuing the previous problem: (question 1)

Calculate the Variance of Returns for the stock.

Give your answer to 2 digits. Do not indicate % in your answer.

3. (question 1)

Calculate the Standard Deviation of Returns for the stock.

Do not include % in your answer. Give your answer to 2 decimals.

4. Suppose you invest 25% of your portfolio in AT&T and 75% in Disney.

Expected $ return on these stocks is 12% and 16% respectively.

The Standard deviation of their annualized daily returns are 20% & 24%, respectively.

Assume a correlation coefficient of 0.75.

Calculate the expected Portfolio Return.

Do not include % in your answer.

Give your answer to 2 decimals.

5. Suppose you invest 25% of your portfolio in AT&T and 75% in Disney.

Expected $ return on these stocks is 12% and 16% respectively.

The Standard deviation of their annualized daily returns are 20% & 24%, respectively.

Assume a correlation coefficient of 0.75.

Calculate Portfolio variance.

Give your answer to 2 decimals.

Do not include % in your answer.

6. Suppose you invest 25% of your portfolio in AT&T and 75% in Disney.

Expected $ return on these stocks is 12% and 16% respectively.

The Standard deviation of their annualized daily returns are 20% & 24%, respectively.

Assume a correlation coefficient of 0.75.

Calculate the Portfolio Standard Deviation.

Give your answer to 2 decimals.

Do not include % in your answer.

7. During the boom years of 2003- 2007, ace mutual fund manager Diana Souros produced the following percentage rates of return.

The percentage rates of return on the market (S&P 500) are given for comparison.

2003 2004 2005 2006 2007

Ms. Sauros 39 11 3 18 4

S&P 500 32 13 7 16 7

Compare Ms Sauros performance with that of the market to judge whether Ms Sauros has performed better than the market (S&P 500).

Calculate the average return of Ms. Sauros's mutual fund.

Give your answer to 2 decimals; do not include % in your answer.

8. (question 7)

Compare Ms Sauros performance with that of the market to judge whether Ms Sauros has performed better than the market (S&P 500).

Calculate the Variance of returns of Ms. Sauros's mutual fund.

Give your answer to 2 decimals; do not include % in your answer.

9. (question 7)

Compare Ms Sauros performance with that of the market to judge whether Ms Sauros has performed better than the market (S&P 500).

Calculate the standard deviation of returns of Ms. Sauros's mutual fund.

Give your answer to 2 decimals; do not include % in your answer.

10. (question 7)

Compare Ms Sauros performance with that of the market to judge whether Ms Sauros has performed better than the market (S&P 500).

Calculate the average return of the market (S&P 500).

Give your answer to 2 decimals; do not include % in your answer.

11. (question 7)

Compare Ms Sauros performance with that of the market to judge whether Ms Sauros has performed better than the market (S&P 500).

Calculate the Variance of the market (S&P 500) returns.

Give your answer to 2 decimals; do not include % in your answer.

12. (question 7)

Compare Ms Sauros performance with that of the market to judge whether Ms Sauros has performed better than the market (S&P 500).

Calculate the standard deviation of the market (S&P 500) returns.

Give your answer to 2 decimals; do not include % in your answer.

13. (question 7)

Compare Ms Sauros performance with that of the market to judge whether Ms Sauros has performed better than the market (S&P 500).

Calculate the Covariance of returns between Ms. Sauros's mutual fund and that of the market (S&P 500).

Give your answer to 2 decimals; do not include % in your answer.

14. (Question 7)

Compare Ms Sauros performance with that of the market to judge whether Ms Sauros has performed better than the market (S&P 500).

Calculate the Correlation of returns between Ms. Sauros's mutual fund and that of the market (S&P 500).

Give your answer to 2 decimals; do not include % in your answer.

15. (question 7)

Compare Ms Sauros performance with that of the market to judge whether Ms Sauros has performed better than the market (S&P 500).

Calculate the beta of Ms. Sauros's mutual fund.

Give your answer to 2 decimals.

16. The correlation coefficient between stock A and the market portfolio is +0.6.

The standard deviation of return of the stock is 30% and that of the market portfolio is 20%.

Calculate the beta of the stock.

Give your answer to 2 decimals.