You own a portfolio containing the following stocks. Stock A Stock B Stock C Stock D
Question:
You own a portfolio containing the following stocks.
| Stock A | Stock B | Stock C | Stock D |
$ Amount | $9,000 | $6,000 | $5,000 | $10,000 |
Expected return | 10.65% | 12.89% | 15.95% | 10.12% |
Stock beta | 1.10 | 0.90 | 1.30 | 1.05 |
Calculate the following statistics: (1/100 of one percent without % sign, e.g. 12.671, if a negative percentage, -9.56):
Expected portfolio return:
17) You own a portfolio containing the following stocks.
You would like to combine a risky stock with a beta of 1.5 with Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market. What percentage of the portfolio should be invested in Treasury bills?
18) An firm is considering a portfolio with equal weighting in a cyclical stock and a countercyclical stock. It is expected that there will be three economic states; Good, Average and Bad, each with equal probabilities of occurrence. The cyclical stock is expected to have returns of 12%, 5% and 1% in Good, Average and Bad economies respectively. The countercyclical stock is expected to have returns of -8%, 2% and 14% in Good, Average and Bad economies respectively. Given this information, calculate portfolio variance.
19) You hold a portfolio of securities which have had the following annual returns: {4%, 18%, -22%, 0%, 20%, 10%}. You believe that these returns are normally distributed. What is the probability that the return in any given year will be less than the arithmetic mean?
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty