Mary's portfolio consists of two stocks. She invested $5,000 in BCD stock and $5,000 in EFG stock. Which of the following best fits your opinion about the standard deviation of her portfolio returns if the standard deviations of BCD and EFG returns are 12% and 15% respectively? 13.5% ○ 14% O13% O indeterminate.

Mary's portfolio consists of two stocks. She invested $5,000 in BCD stock and $5,000 in EFG stock. Which of the following best fits your opinion about the standard deviation of her portfolio returns if the standard deviations of BCD and EFG returns are 12% and 15% respectively? 13.5% ○ 14% O13% O indeterminate.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 12P

See similar textbooks

Similar questions

Christy is considering investing in the common stock of One Liberty and Heico. The following data are available for these two securities: One Liberty Heico Expected return 0.12 0.16 Standard deviation of returns 0.08 0.20 If she invests 30% of her funds in Heico and 70% in One Liberty, and if the correlation of returns between these securities is +0.65, what is the portfolio's expected return and standard deviation?
Rebecca invested $9,000 in a stock that has an expected return equal to 18 percent and $21,000 in a stock with an 8 percent expected return. What is the portfolio’s expected return?
Neha is an analyst at a wealth management firm. One of her clients holds a $7,500 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. 35% 0.750 0.53% Arthur Inc. 20% 1.400 0.57% Li Corp. 15% 1.300 0.60% Transfer Fuels Co. 30% 0.300 0.64% Neha calculated the portfolio’s beta as 0.828 and the portfolio’s expected return as 8.55%. Neha thinks it will be a good idea to reallocate the funds in her client’s portfolio. She recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4.00%, and the market risk premium is 5.50%. 1. According to Neha’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? 0.86% 0.67% 1.07% 0.99%…
She has $71,000 invested in stock A with a beta of 1.30 and another $56,000 invested in stock B with a beta of .60. If these are the only two investments in her portfolio, what is her portfolio’s beta?
Brandon is an analyst at a wealth management firm. One of his clients holds a $5,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.750 38.00% Arthur Trust Inc. (AT) 20% 1.500 42.00% Li Corp. (LC) 15% 1.100 45.00% Baque Co. (BC) 30% 0.300 49.00% Brandon calculated the portfolio’s beta as 0.818 and the portfolio’s required return as 8.4990%. Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Baque Co. The risk-free rate is 4%, and the market risk premium is 5.50%. According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? (Note: Do not round your…
Mrs. Landis has a 2-stock portfolio with a total value of $530,000. $175,000 is invested in Stock A with a beta of 1.55 and the remainder is invested in Stock B with a beta of 1.25. What is her portfolio's beta?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. A. 1.17 B. 1.35 C. 1.59 D. 1.27 E. 1.46
Mr. Jones has a 2-stock portfolio with a total value of $550,000. $185,000 is invested in Stock A and the remainder is invested in Stock B. If standard deviation of Stock A is 19.10%, Stock B is 8.95%, and correlation between Stock A and Stock B is –0.90, what would be the expected risk on Mr. Jones’ portfolio (standard deviation of the portfolio return)?Calcualte with at least 4 decimal places and round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. A. 3.31% B. 2.80% C. 2.16% D. 3.14% E. 3.00%
Mr. Jones has a 2-stock portfolio with a total value of $560,000. $225,000 is invested in Stock A and the remainder is invested in Stock B. If standard deviation of Stock A is 16.80%, Stock B is 10.75%, and correlation between Stock A and Stock B is 0.50, what would be the expected risk on Mr. Jones’ portfolio (standard deviation of the portfolio return)?Calcualte with at least 4 decimal places and round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
Hyacinth Macaw invests 60% of her funds in stock I and the balanced stock in J. The standard deviation of returns on I is 10% and on J it is 20%. Calculate the variance and standard deviation of portfolio returns, assuming: The correlation between the returns is 1.0 (make sure you state the formula)
An individual has $36000 invested in Stock A with a beta of 1.1 and another $35000 invested in Stock B with a beta of 1.4. If these are the only two investments in her portfolio, what is her portfolio's beta?
Mr. Jones has a 2-stock portfolio with a total value of $510,000. $175,000 is invested in Stock A and the remainder is invested in Stock B. If standard deviation of Stock A is 16.10%, Stock B is 8.60%, and correlation between Stock A and Stock B is 0.50, what would be the expected risk on Mr. Jones’ portfolio (standard deviation of the portfolio return)? Calcualte with at least 4 decimal places and round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
You decide to invest in a portfolio consisting of 15 percent Stock �, 51 percent Stock Y, and the remainder in Stock Z. Based on the following information in the picture, what is the standard deviation of your portfolio? Multiple Choice 8.44% 2.51% 3.35% 7.24% 5.79%