KConsider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 29% probability that the firm will have a 24% return anda 71% probability that the firm will have a -11% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in:a. 40 firms of type S?b. 40 firms of type I?a. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type S?Standard deviation is%. (Round to two decimal places.)b. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type I?Standard deviation is %. (Round to two decimal places.)

The firm S's probability is 29% and the rate of return is 24%. The firm I's probability is 71% and…

Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 29% probability that the firm will have a 24% return and a 71% probability that the firm will have a -11% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 40 firms of type S? b. 40 firms of type 1? a. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type S? Standard deviation is%. (Round to two decimal places.) b. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type I? Standard deviation is %. (Round to two decimal places.)

Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 29% probability that the firm will have a 24% return and a 71% probability that the firm will have a -11% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 40 firms of type S? b. 40 firms of type 1? a. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type S? Standard deviation is%. (Round to two decimal places.) b. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type I? Standard deviation is %. (Round to two decimal places.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 64% probability that the firm will have a 25% return and a 36% probability that the firm will have a -2% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 40 firms of type S? b. 40 firms of type l? a. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type S? Standard deviation is%. (Round to two decimal places.)
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 60% probability that the firm will have a 15% return and a 40% probability that the firm will have a -10% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 20 firms of type S? b. 20 firms of type l?
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 60% probability that the firm will have a 15% return and a 40% probability that the firm will have a −10% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 20 firms of type S? b. 20 firms of type I?
Consider an economy with two types of firms, S and I. S firms all move together. I firms move independently. For both types of firms, there is a 49% probability that the firm will have a 30% return and a 51% probability that the firm will have a - 7% return. What is the volatility (standard deviation) of a portfolio that consists of an equal investment in: a. 31 firms of type S? b. 31 firms of type I?
Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firms there is a 40% probability that the firm will have a 20% return and a 60% probability that the firm will have a -30% return. The standard deviation for the return on a portfolio of 20 type I firms is closest to: O A. -10% OB. 24.49% OC. 5.48% O D. 12.25%
Suppose there are two independent economic factors, M₁ and M₂. The risk-free rate is 4%, and all stocks have independent firm-specific components with a standard deviation of 41%. Portfolios A and B are both well diversified. Portfolio Beta on M₁ Beta on M₂ Expected Return (%) A B 1.8 2.2 2.3 -0.5 31 9 What is the expected return-beta relationship in this economy
Use the information for the question(s) below. Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firm there is a 70% probability that the firm will have a 20% return and a 30% probability that the firm will have a -30% return. The standard deviation for the return on a portfolio of 20 type S firms is closest to: Question content area bottom Part 1 A. 23.0%. B. 5.10%. C. 5.25%. D. 15.0%.
Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 4%, and all stocks have independent firm-specific components with a standard deviation of 49%. Portfolios A and B are both well diversified. Portfolio Beta on M1 Beta on M2 Expected Return (%) A 1.6 2.4 39 B 2.3 -0.7 9 Required: What is the expected return–beta relationship in this economy?
Use the following information to answer questions 3 - 8. The return for two companies, Alpha and Beta, depends on the strength of the economy. Economy Probability Alpha Return Beta Return strong 0.3 12% 5% normal 0.5 6% 8% weak 0.2 2% 10% What is the standard deviation of returns for the portfolio? 0 2.25% 5.575% D O 6.25% 50% 5% 5% C) 8.363% 6% Con Delta. expected to that invests 45% in Gamma and 55% in dard
A firm has a choice between 2 investment proposals. Using the information in the table below, which investment will the firm choose? A firm has a choice between 2 investment proposals. Using the information in the table below, which investment will the firm choose? Investment A Investment B Mean return 15% 15% Standard deviation of returns .9% .8% Correlation coefficient -.8 -.7
Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 43%. Portfolios A and B are both well-diversified with the following properties: Portfolio Beta on F1 Beta on F2 Expected Return A 1.9 2.2 33 % B 2.8 –0.22 28 % What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP1 and RP2, to complete the equation below. (Do not round intermediate calculations. Round your answers to two decimal places.)E(rP) = rf + (βP1 × RP1) + (βP2 × RP2)
Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and all stocks have independent firm- specific components with a standard deviation of 53%. Portfolios A and B are both well-diversified with the following properties: Portfolio A B Beta on F1 1.5 2.5 Beta on F2 Expected Return 1.9 -0.19 31% 28% Required: What is the expected return-beta relationship in this economy? Calculate the risk-free rate, rf, and the factor risk premiums, RP1 and RP2 to complete the equation below. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. E(rp) rf+(BP1 x RP1) + (BP2 x RP2) " % RP % RP2 %

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