Anna holds a portfolio comprising the following 3 stocks: X, Y and Z. Amount $'000 2,000...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Anna holds a portfolio comprising the following 3 stocks: X, Y and Z. Amount $'000 2,000 1,000 500 (a) (b) (c) (d) Investment Security X Security Y Security Z Determine the expected return of security X. Calculate the return of Anna's portfolio. Beta 1.3 Calculate the beta of Anna's portfolio. P 0.5714 1.00.2857 0 0.1420 Expected Return 10% 2% (4 marks) (4 marks) (4 marks) To reduce the systematic risk of the portfolio, Anna is considering 3 securities to add to the portfolio. Security A has a beta of 0, security B has a beta of 0.5 and Security C has a beta of -0.3. Discuss which security will be most effective in reducing the portfolio's systematic risk? How would portfolio expected return change (higher or lower) if you add this security? (8 marks) Anna holds a portfolio comprising the following 3 stocks: X, Y and Z. Amount $'000 2,000 1,000 500 (a) (b) (c) (d) Investment Security X Security Y Security Z Determine the expected return of security X. Calculate the return of Anna's portfolio. Beta 1.3 Calculate the beta of Anna's portfolio. P 0.5714 1.00.2857 0 0.1420 Expected Return 10% 2% (4 marks) (4 marks) (4 marks) To reduce the systematic risk of the portfolio, Anna is considering 3 securities to add to the portfolio. Security A has a beta of 0, security B has a beta of 0.5 and Security C has a beta of -0.3. Discuss which security will be most effective in reducing the portfolio's systematic risk? How would portfolio expected return change (higher or lower) if you add this security? (8 marks)
Expert Answer:
Answer rating: 100% (QA)
a The expected return of security X can be calculated using the formula Expected Return Beta Market ... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
Considerations that affect the selection of an inventory costing method do not include: (a) tax effects. (b) balance sheet effects. (c) income statement effects. (d) perpetual vs. periodic inventory...
-
Describe the life cycle approach for teaching entrepreneurial finance.
-
The governing equations and initial conditions of a dynamic system are provided. Plot the specified output(s), together with the input(s), by using the lsim command. Note that \(u(t)\) denotes the...
-
An 1100-kg car stops at a red light, going from \(85 \mathrm{~km} / \mathrm{h}\) to stationary in 20 s. (a) What is the impulse delivered to the car? (b) What is the average vector sum of forces...
-
Using the data from the Koko Company, determine the divisional income from operations for the A and B regions Allocate service department expenses proportional to the sales of eachregion. A RegionB...
-
11. The current in a metallic conductor is plotted against voltage at two different temperatures T and T2. Which is correct :- Current 2 (1) T Voltage (2) T
-
A system offers four service classes A, B, C and D, which differ in price tag and have a distinctive public method doA(), doB(), doC(), and doD(), respectively. These classes do share an identical...
-
Pharoas Corporation paid $16,200 for a 90% interest in Sonista Corporation on January 1, 2019, when Sonista stockholders' equity consisted of $10,000 Capital Stock and $3,000 of Retained Earnings....
-
Use the firm's websites to research the price of shipping your Economics textbook to a friend in Colorado Springs, CO 80903 using the services of United Parcel Service (UPS), Federal Express (FedEX)...
-
Oyster Oil Company has the option to pursue leases in the following two areas: A) An onshore field, A, where: - A well costs $3.0 million to drill and complete. It costs $500,000 to connect the well...
-
The following data is provided for Garcon Company and Pepper Company for the year ended December 31. Garcon Company $ 12,700 Pepper Company Finished goods inventory, beginning Work in process...
-
Be sure to answer ALL questions and ALL parts of the question. Credit only for correct and complete answers. For Christmas, Billy got a cute new pet, a Mogwai, for Christmas from his father while he...
-
Bank Islam and Bank Bumi House Purchase Financing - Purchase from a developer Bank Islam's house financing scheme under the Bai al-Bitaman Ajil (BBA) principle is as follows: 30 years (monthly...
-
If you are the CEO of a multinational company and you are evaluating the possibility of starting operations in a developing country, what elements do you think should be evaluated to measure the...
-
Orange juice producers are dismayed and puzzled. An economist told them that the reason the demand for orange juice fell is that a new technology allow tomato producers to pick ripe tomatoes more...
-
Researchers M. Dhami et al. discussed how people adjust to prison life in the article "Adaption to Imprisonment" (Criminal Justice and Behavior, Vol. 34, No. 8, pp. 1085-1100). A sample of 712...
-
When two balanced dice are rolled, 36 equally likely outcomes are possible, as illustrated in Fig. 4.1 on page 159. Let In Fig 4.1 A = event the red die comes up even, B = event the black die comes...
-
Refer to Table 4.1 on page 157. a. List the possible samples without replacement of size 4 that can be obtained from the population of five officials. If a simple random sample without replacement of...
-
Suppose that the probability of finding some particle 1 at \(x_{1}\) is a Gaussian around \(x_{1}\), with standard deviation \(\sigma_{1}\), and the probability of finding another particle 2 at...
-
Is a real function of a Hermitian operator \(\hat{A}, f(\hat{A})\), also Hermitian? Give examples.
-
Show how \(\delta^{\prime \prime}(x-y)\) (the second derivative with respect to \(x\) ) acts as a distribution on functions.
Study smarter with the SolutionInn App