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16. If you hold a portfolio made up of the following stocks:
Investment Value Beta
Stock A $2000 1.5
Stock B $5000 1.2
Stock C $.8
What is the beta of the portfolio?
d) can't be determined from information given
17. Your broker mailed you your year end statement. You have $25,000 invested in Dow Chemical, $18,000 tied up in GM, $36,000 in Microsoft stock, and $11,000 in Nike. The annualized return for these stocks is 16.5% for Dow, 12.0% for GM, 18.5% for Microsoft, and 15.3% for Nike. What is the return of your entire portfolio?
b) 16.25%
|25000 |0.277778 |16.5 |4.58 |
|18000 |0.2 |12 |2.40 |
|36000 |0.4 |18.5 |7.40 |
|11000 |0.122222 |15.3 |1.87 |
|90000 |1 | |16.25 |
18. You are considering investing in a firm that has the following possible outcome:
Economic boom: probability of 25%; return of 25%
Economic growth: probability of 60%; return of 15%
Economic decline: probability of 15%; return of -5%
What is the expected rate of return on the investment?
b) 14.5%
|0.25 |25 |6.25 |
|0.6 |15 |9.00 |
|0.15 |-5 |-0.75 |
|1 | | |
| | |14.50 |
19. Wilson Inc is expecting the following return on their stock and related probabilities. Calculate Wilson's expected return.
State Probability Return
Boom 30% 30%
Normal 70% 10%
b) 16%
.3*30+.7*10
20. If there is a 20% chance we will get a 16% return, a 30% chance of getting a 14% return, a 40% chance of getting a 12% return, and a 10% chance of getting an 8% return. What is the expected rate of return?
a) 13%
|0.2 |16 |3.20 |
|0.3 |14 |4.20 |
|0.4 |12 |4.80 |
|0.1 |8 |0.80 |
|1 | |13.00 |
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