sider 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 5% 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: O firms of type S? O firms of type I? C... What is the volatility (standard deviation) of a portfolio that consists of an equal investment in 40 firms of type S? ndard deviation is %. (Round to two decimal places.)
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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 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 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?K 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 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.)
- 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?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 economyConsider 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%
- Consider a single-index model economy. The index portfolio M has E(RM ) = 6%, σM = 18%.An individual asset i has an estimate of βi = 1.1 and σ2ei = 0.0225 using the single index modelRi = αi + βiRM + ei. The forecast of asset i’s return is E(ri) = 12%. rf = 4%. a) According to asset i’s return forecast, calculate αi. (b) Calculate the optimal weight of combining asset i and the index portfolio M . (c) Calculate the Sharpe ratio of the index portfolio M and the portfolio optimally combiningasset i and the index portfolio M .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?
- Consider an economy with just two assets. The details of these are given below. Number of Shares Price Expected Return Standard Deviation A 100 1.5 15 15 B 150 2 12 9 The correlation coefficient between the returns on the two assets is 1=3 and there is also a risk-free asset. Assume the CAPM model is satisfied. (1) What is the expected rate of return on the market portfolio? (2) What is the standard deviation of the market portfolio? (3) What is the beta of stock A? (4) What is the risk-free rate of return?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 %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+(PP1 x RP1) + (BP2 x RP2) % RP1 % RP2 %