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You have done your research for the following investments and your friend has provided their expectations for the markets for next year. Probability of State of Economy State of Economy .30 40 30 Stock A Stock В Boom 30% Normal 16% Recession -10% * Remember to show all of your work * a. Calculate the expected return for stock A. b. Calculate the expected return for stock B. c. Calculate the expected return for the TSX d. Calculate the risk for stock A. e. Calculate the risk for stock B. f. Calculate the risk for the TSX. g. Calculate the covariance and correlation of the returns for stock A and stock B. h. Calculate the covariance and correlation of the returns for stock A and the TSX. i. Calculate the covariance and correlation of the returns for stock B and the TSX. j. Calculate the beta of Stock A. k. Calculate the beta of stock B. 1. Calculate the beta for the TSX. m. Using an excel spreadsheet and the calculations you have done above, prepare a spreadsheet that provides the expected returns and the risk for a portfolio that invests in stock A and stock B. Prepare the calculations using 4% increments in the weights. n. Using the excel spreadsheet and the information from part m, create a graph of your results. -9% 12% 20% TSX 18% 10% -10% o. You have $10,000 to invest and would like to create a portfolio that has an expected return of 15 percent. How much will you need to invest in stock A and stock B and what is the risk that is associated with this portfolio? You have done your research for the following investments and your friend has provided their expectations for the markets for next year. Probability of State of Economy State of Economy .30 40 30 Stock A Stock В Boom 30% Normal 16% Recession -10% * Remember to show all of your work * a. Calculate the expected return for stock A. b. Calculate the expected return for stock B. c. Calculate the expected return for the TSX d. Calculate the risk for stock A. e. Calculate the risk for stock B. f. Calculate the risk for the TSX. g. Calculate the covariance and correlation of the returns for stock A and stock B. h. Calculate the covariance and correlation of the returns for stock A and the TSX. i. Calculate the covariance and correlation of the returns for stock B and the TSX. j. Calculate the beta of Stock A. k. Calculate the beta of stock B. 1. Calculate the beta for the TSX. m. Using an excel spreadsheet and the calculations you have done above, prepare a spreadsheet that provides the expected returns and the risk for a portfolio that invests in stock A and stock B. Prepare the calculations using 4% increments in the weights. n. Using the excel spreadsheet and the information from part m, create a graph of your results. -9% 12% 20% TSX 18% 10% -10% o. You have $10,000 to invest and would like to create a portfolio that has an expected return of 15 percent. How much will you need to invest in stock A and stock B and what is the risk that is associated with this portfolio?
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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