A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.65. The expected returns and standard deviations of the two stocks are given in the following table a. What is the expected return of the hedge fund's portfolio? b. What is the standard deviation of the hedge fund's portfolio? a. What is the expected return of the hedge fund's portfolio? The expected return of the hedge fund's portfolio is%. (Round to two decimal places.)
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- A hedge fund has created a portfolio using just two stocks. It has shorted $47,000,000 worth of Oracle stock and has purchased $96,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.62. The expected returns and standard deviations of the two stocks are given in the table below: a. What is the expected return of the hedge fund's portfolio? b. What is the standard deviation of the hedge fund's portfolio? a. What is the expected return of the hedge fund's portfolio? The expected return of the hedge fund's portfolio is%. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Expected Return Standard Deviation Oracle Intel 12.04% 14.24% 44.54% 40.96% XA hedge fund has created a portfolio using just two stocks. It has shorted $34,000,000 worth of Oracle stock and has purchased $77,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.63. The expected returns and standard deviations of the two stocks are given in the following table below. Suppose the correlation between Intel and Oracle's stock increases, but nothing else changes. Would the portfolio be more or less risky with this change?A hedge fund has created a portfolio using just two stocks. It has shorted $25,000,000 worth of Oracle stock and has purchased $75,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.61. The expected returns and standard deviations of the two stocks are given in the following table: a. What is the expected return of the hedge fund's portfolio? b. What is the standard deviation of the hedge fund's portfolio?
- A hedge fund has created a portfolio using just two stocks. It has shorted $27,000,000 worth of Oracle stock and has purchased $99,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.69. The expected returns and standard deviations of the two stocks are given in the following table:Suppose the correlation between Intel and Oracle's stock increases, but nothing else changes. Would the portfolio be more or less risky with this change? (Select the best choice below.) O A. More risky. O B. Cannot say without knowing how investors trade off expected return and volatility. O C. Riskiness of the portfolio stays the same. O D. Less risky. Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Expected Return Standard Deviation 12.11% 14.42% Oracle Intel 45.45% 38.53% XSyntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Common Stock B Probability Return Probability Return 0.35 13% 0.25 −7% 0.30 17% 0.25 8% 0.35 21% 0.25 15% 0.25 23% (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. Given the information in the table, the expected rate of return for stock A is enter your response here%. (Round to two decimal places.)Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Common Stock B Probability Return Probability Return 0.25 13% 0.25 −7% 0.50 14% 0.25 7% 0.25 18% 0.25 16% 0.25 23% (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. Given the information in the table, the expected rate of return for stock A is enter your response here %. (Round to two decimal places.) Part 2 The standard deviation of stock A is enter your response here %. (Round to two decimal places.) Part 3 b. The expected rate of return for stock B is enter your response here %. (Round to two decimal places.) Part 4 The standard deviation for stock B is enter…
- As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Fund T Fund U Forecasted Return 9.0% 10.0 CAPM Beta 1.20 0.80 a) If the risk-free rate is 3.9 % and the expected market risk premium is 6.1%, calculate the expected return for each mutual fund according to the CAPM. b) Using the estimated expected returns from Part a along with your own return forecasts, explain whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. Are Funds T and U overvalued, undervalued, or properly valued?As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 f the risk-free rate (RFR) is 3.9% and the expected market risk premium (i.e., E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the 3.а. САРМ.(Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Probability 0.20 0.60 0.20 Probability 0.15 0.35 0.35 0.15 (Click on the icon in order to copy its contents into a spreadsheet.) Common Stock B Return 13% 14% 18% Return - 6% 7% 15% 21% a. Given the information in the table, the expected rate of return for stock A is 14.6 %. (Round to two decimal places.) The standard deviation of stock A is %. (Round to two decimal places.)
- Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return A 8.86 % B C с 11.26 13.18 % Standard Deviation 16 % 16 16 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Beta 0.7 1.2 1.6 X Open spreadsheet a. What is the market risk premium (MRF)? Round your answer to two decimal places. % b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to…Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock A B с Expected Return 9.34 % 11.26 12.70 % Standard Deviation 16 % 16 16 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. % Beta X Open spreadsheet a. What is the market risk premium (rm - ÖRF)? Round your answer to two decimal places. 0.8 1.2 1.5 b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. I. less than 16% II. greater than 16% III. equal to 16% c. What is the required return of Fund P? Do…Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 5.00%. What rate of return should investors expect (and require) on this fund? (Hint: first calculate the weights, then calculate the beta of the portfolio and then calculate the required return of the portfolio.) Show your work. Stock Amount Weights Beta A $1,075,000 ? 1.20 B 675,000 ? 0.50 C 750,000 ? 1.40 D 500,000 ? 0.75 $3,000,000