View the step-by-step solution to:

Question

This question was created from ADM3415-Midterm2018 Winter.tst.pdf https://www.coursehero.com/file/35919195/ADM3415-Midterm2018-Wintertstpdf/

35919195-357925.jpeg

how do i do this question?

CAN YOU PLEASE SHOW ME HOW TO GET THE ANSWERS FOR THESE QUESTIONS

35919195-357925.jpeg

Following are several months rate of return for Market Index, Stock A, and Stock B. The
variance and covariance matrix is constructued from the returns data.
Returns Data
Returns on
Returns on Stock Returns on Stock
Market
A
B
10%
15%
5%
7%
12%
8%
9%
13%
2%
11%
14%
5%
-2%
5%
10%
Additional information:
Variance of market returns is 22.0, variance of stock A is 12.6 and variance of stock B is
7.4. Covariance between market return and stock A returns is 16.4 and between market
returns and Stock B returns is -9.6. The correlation coefficient between returns of Stock A
and Stock B is -7.
Compute:
a. Average returns for the Market Index, Stock A, and Stock B.
b. If you have created a portfolio with 60% on Stock A and 40% on Stock B. what is the
return on your portfolio?
c. What is the portfolio standard deviaiton for your portfolio in part b.
d. Compute the beta of each stock and identify each stock as Aggressive or Neutral or
Defensive stock.
e. What is your portfolio beta in part b.

Top Answer

#a Average Return Market Index = 1/5 x (10% + 7% + 9% + 11% - 2%) = 7% Average Return Stock A = 1/5 x (15% + 12% + 13% + 14%... View the full answer

Covariance Formula.png

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question