What is the volatility? I . Consider a world with only two risky assets, A and B
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
I . Consider a world with only two risky assets, A and B and a risk free asset. Stock A has 200 shares outstanding, a price per share of $3.00, an expected return of 16% and a volatility of 30%. Stock B has 200 shares outstanding, a price per share of $4.00, an expected return of 10% 0.4. Assume CAPM and a volatility of 15%. The correlation coefficient between a and b is p = holds: a. What is expected return of the market portfolio? I . Consider a world with only two risky assets, A and B and a risk free asset. Stock A has 200 shares outstanding, a price per share of $3.00, an expected return of 16% and a volatility of 30%. Stock B has 200 shares outstanding, a price per share of $4.00, an expected return of 10% 0.4. Assume CAPM and a volatility of 15%. The correlation coefficient between a and b is p = holds: a. What is expected return of the market portfolio?
Expert Answer:
Answer rating: 100% (QA)
Volatility refers to the degree of variation of a financial assets price over ... View the full answer
Related Book For
An Introduction to the Mathematics of Financial Derivatives
ISBN: 978-0123846822
3rd edition
Authors: Ali Hirsa, Salih N. Neftci
Posted Date:
Students also viewed these accounting questions
-
EBIT is 22.000, taxes 34%, depreciation is 30.000. What is the operating cash flow? Anthony operates a part time auto repair service. He estimates that a new diagnostic computer system will result...
-
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...
-
Consider a world with only two countries, which are designated the home country (H) and the foreign country (F). Output equals its full-employment level in each country. You are given the following...
-
Verde Company produces wheels for bicycles. During the year, 657,000 wheels were produced. The actual labor used was 368,000 hours at $9.50 per hour. Verde has the following labor standards: 1)...
-
There are many useful online resources regarding budgeting. The following activity investigates the results of a comprehensive budgeting study performed by a very large international accounting firm....
-
Sandhill Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $1080000 Estimated...
-
If MBSE is a tool that satisfies an SE solution space, define the problem space it is intended fill.
-
STOCK ISSUANCE (PAR, NO-PAR, AND STATED VALUE) The following stock transactions occurred during January 20-- for Bremer Corporation: (a) Issued 5,000 shares of $10 par common stock for $50,000 cash....
-
Santa Clara recently purchased a new boat to help ship products overseas. The following information is related to that purchase Purchase price $5,000,000 Cost to bring the boat to the production...
-
m 30C Haze n 4. Question 4 An online store wants to analyze various aspects of using coupons, including the distribution of discounts and savings. The company is developing a report that displays the...
-
An Australian firm, has a USD428 million payable in one year that it wants to hedge, and enters into a risk sharing arrangement with its US supplier. The terms of the risk sharing contract are the...
-
Two companies have the same amount of working capital. The current debt paying ability of one company is much weaker than that of the other. Explain how this could occur.
-
Double entry implies that transaction is recorded in journal and ledger. Explain.
-
A uniform system of accounts, including identical forms for balance sheets and income statements is a prerequisite of inter firm comparisons. Elucidate.
-
Distinguish between the following: (i) Long-term assets and Current assets (ii) Tangible assets and Non-tangible assets (iii) Long-term liabilities and Current liabilities (iv) Gross profit and...
-
What is a manufacturing account? What is its objectives? Prepare a manufacturing account with appropriate imaginary figures.
-
Ken makes a one-time investment of $5,000.00 into a CD that pays 8% interest compounded weekly for 9 years. a) How much will he have at the end of 9 years? Round your final answer to the nearest...
-
Find the radius of convergence in two ways: (a) Directly by the CauchyHadamard formula in Sec. 15.2. (b) From a series of simpler terms by using Theorem 3 or Theorem 4.
-
Consider a fixed-payer, plain vanilla, interest rate swap paid in arrears with the following characteristics: The start date is in 12 months, the maturity is 24 months. Floating rate is 6 month USD...
-
Consider the following SDE for the spot rate: drt = rtdWt. (a) Write a program that simulates a path for rt by simulating dWt. Assume r0 = 0.01, T = 2.0 and = 0.05. Calculate the expectation of the...
-
Estimate the price of a European barrier option that expires in 30 days and that allows the owner to purchase a share of a given stock for $100 provided itsprice exceeds $110sometime in the next 30...
-
A piston-cylinder device contains \(1.2 \mathrm{~kg}\) of saturated water vapour at \(180^{\circ} \mathrm{C}\). Heat is transferred to steam. As a result, steam expands reversibly to a final pressure...
-
Prove that \(C_{P}>C_{V}\), where the notations have their usual meanings.
-
In a chemical process plant, water at 67C is pumped from a storage tank at the rate of 20,000 kg/hr. The motor for the pump expenses work at the rate of 1.5 hp. The water passes through a heat...
Study smarter with the SolutionInn App