a) Calculate the expected average rate of return and the standard deviation on each of the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
a) Calculate the expected average rate of return and the standard deviation on each of the two alternatives: Dell and HP, in addition to the market index. b) Calculate the coefficient of Correlation between Dell and HP. c) Suppose you created a 2-stock portfolio by investing $75,000 in Dell and $25,000 in HP, calculate the expected return, the standard deviation, and the coefficient of variation (CVp) for this portfolio. d) Use the previously calculated standard deviations for Dell, HP and the market in question (a) to estimate Dell's and HP's betas e) If the risk free rate equals 4%, and the expected rate on the market equals 9%, find the required rate of return on Dell and HP. f) Would you purchase Dell and/or HP? Why? g) Suppose you form a portfolio with $1.4 million in Dell and $0.6 million in HP, what is the Required Return on the Portfolio? Year 1 2 3 4 5 6 7 8 9 10 Market 30% 7 18 -22 -14 10 26 -10 -3 38 Dell 26% 15 -14 <-15 2 -18 42 30 -32 28 HP 47% -54 15 7 -28 40 17 -23 -4 75 a) Calculate the expected average rate of return and the standard deviation on each of the two alternatives: Dell and HP, in addition to the market index. b) Calculate the coefficient of Correlation between Dell and HP. c) Suppose you created a 2-stock portfolio by investing $75,000 in Dell and $25,000 in HP, calculate the expected return, the standard deviation, and the coefficient of variation (CVp) for this portfolio. d) Use the previously calculated standard deviations for Dell, HP and the market in question (a) to estimate Dell's and HP's betas e) If the risk free rate equals 4%, and the expected rate on the market equals 9%, find the required rate of return on Dell and HP. f) Would you purchase Dell and/or HP? Why? g) Suppose you form a portfolio with $1.4 million in Dell and $0.6 million in HP, what is the Required Return on the Portfolio? Year 1 2 3 4 5 6 7 8 9 10 Market 30% 7 18 -22 -14 10 26 -10 -3 38 Dell 26% 15 -14 <-15 2 -18 42 30 -32 28 HP 47% -54 15 7 -28 40 17 -23 -4 75
Expert Answer:
Answer rating: 100% (QA)
Solution a Expected Average Rate of Return Dell 26 HP 47 Market 9 Standard Deviation Dell 15 HP 18 M... View the full answer
Related Book For
Posted Date:
Students also viewed these general management questions
-
You have completed your first meeting with Harper and Riley Evans. You are confident that you now have most of the information you will need to prepare a comprehensive financial plan for them. Beyond...
-
There are two concepts under confidentiality: Attorney-Client Privilege and the Rule of Confidentiality. Identify and describe at least four similarities and four differences.
-
Question: Calculate the mass of the liquid for each trial. (Subtract the mass of the empty graduated cylinder from the mass of the graduated cylinder with liquid.) Trial 1 10.6 Trial 2 10.0 Trial 3...
-
Sysco is a global leader in marketing and distributing food products to restaurants, health- care and educational facilities, lodging establishments, and other customers who prepare meals away from...
-
A retail business, using, owed merchandise creditors (accounts payable) $320,000 at the beginning of the year and $350,000 at the end of the year. How would the $30,000 increase be used to adjust net...
-
You have collected the following data: If you randomly select one of these 10 numbers, what is the probability the number (X) will be ... a. equal to 4 ? b. equal to 7 ? c. less than 5 ? d. greater...
-
You have estimated the following probability distributions of expected future returns for Stocks X and Y: a. What is the expected rate of return for Stock X? Stock Y? b. What is the standard...
-
The demand for one of the major products for a company sustained large and continuing declines. As a result, the company performed an asset impairment test on the fixed assets that were associated...
-
You have just been hired as a brand manager at Kelsey-White, an American multinational consumer goods company. Recently the firm invested in the development of K-W Vision, a series of systems and...
-
Demonstrate how the principal agent problem manifests in the arena of corporate governance. What are some signs of good governance and what are some signs of bad governance? What are some mechanisms...
-
Use the assignment method for loading.
-
Use and interpret Gantt charts.
-
Do sensitivity analysis on the solution to a linear programming problem.
-
Constant Corporation is a family-owned corporation. This year Constant redeemed stock from some of its owners. Because of the attribution rules of Code Sec. 318, the redemptions did not qualify for...
-
Ted purchased all of the stock of Fontana Manufacturing Corporation in 2017 for $170,000. Under Teds leadership, Fontana Manufacturing soon became unprofitable, and Ted decided to liquidate Fontana...
-
Autotechs LLP is an engineering performance enhancement specialist in the provision of a particular performance testing service for high-performance road cars. Autotechs seeks to provide a premium...
-
Let X be a random variable taking on values a1, a2, . . . , pr with probabilities p1, p2, . . . , pr and with E(X) = μ. Define the spread of X as follows: This, like the standard deviation, is a...
-
If the risk-free rate of return, rRF, is 4 percent and the market return, rM, is expected to be 12 percent, what is the required rate of return for a stock with a beta, 13, equal to 2.5?
-
Consider the following operating information gathered from three firms that are identical except for their capital structures: a. Compute the WACC for each firm. b. Compute the EVA for each firm. c....
-
Unique Uniforms generally has accounts receivables that equal $480,000. If the accounts receivables turnover for the company is 12, what is its (a) Receivables collection period (DSO) (b) Annual...
-
Someone says: Our firm focuses on maintaining long-term relationships with our customers. We dont have to do any prospecting. Evaluate this statement.
-
Give some examples of how CRM-enabled sales analytics can provide valuable insights at each of these stages of the customer journey: prospect (lead), initial customer contact, engagement with the...
-
Why do some salespeople not immediately embrace the use of the newest technologies? What are some ways in which a salesperson who is reluctant to adopt new technologies might be influenced to do so?
Study smarter with the SolutionInn App