The diversifiable risk of a portfolio: a. Is correlated with systematic risk. b. Can be made sufficiently small. c. Is zero in the real world. d. Is the risk that investors lose because of transaction costs.
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The diversifiable risk of a portfolio:
a. Is
b. Can be made sufficiently small.
c. Is zero in the real world.
d. Is the risk that investors lose because of transaction costs.
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- The Capital Asset Pricing Model (CAPM) is a financial model that assumes returns on a portfolio are normally distributed. Suppose a portfolio has an average annual return of 14.7% (i.e. an average gain of 14.7%) with a standard deviation of 33%. A return of 0% means the value of the portfolio doesn’t change, a negative return means that the portfolio loses money, and a positive return means that the portfolio gains money. What percent of years does this portfolio lose money, i.e. have a return less than 0%? What is the cutoff for the highest 15% of annual returns with this portfolio?Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Celestial Crane Cosmetics Inc. (CCC): Five years of realized returns for CCC are given in the following table. Remember: 1. While CCC was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for CCC for 2014 to 2018 are: 2014 2015 2016 2017 2018 Stock return 18.75% 12.75% 22.50% 31.50% 9.75% Given the preceding data, the average realized return on CCC’s stock is . The preceding data series represents of CCC’s historical returns. Based on this conclusion, the standard deviation of CCC’s historical returns is . If investors expect the…Two investments, X and Y, have the characteristics shown below. E(X) = $60, E(Y) = $90, o = 10,000, o? = 17,000 and axy = 6,500 If the weight of portfolio assets assigned to investment X is 0.8, calculate the a. portfolio expected return and b. portfolio risk. a. If the weight of portfolio assets assigned to investment X is 0.8, the portfolio expected return is $ (Type an integer or a decimal.) b. If the weight of portfolio assets assigned to investment X is 0.8, the portfolio risk is approximately $. (Round to two decimal places as needed.)
- The Capital Asset Pricing Model (CAPM) is a financial model that assumes returns on a portfolio are normally distributed. Suppose a portfolio has an average annual return of 14.7% (i.e. an average gain of 14.7%) with a standard deviation of 33%. A return of 0% means the value of the portfolio doesn't change, a negative return means that the portfolio loses money, and a positive return means that the portfolio gains money. (please round answers to within one hundredth of a percent) (a) What percent of years does this portfolio lose money, i.e. have a return less than 0%? (b) What is the cutoff for the highest 15% of annual returns with this portfolio?Provide intuition for the asset pricing equation: P Et (M+1 Xt+1) where M is the stochastic discount factor and X is tomorrow's return on the asset. Calculus is not required but you should provide graphical intuition.Let x1 and x2 be the payoffs of two investment
- 1. Determine whether the variable is categorical or numeric. If the variable is numeric, determine whether the phenomenon of interest is discrete or continuous. The income of the families of clients seen at the clinic. Select one: a. Numeric, continuous b. Categorical c. Numeric, discreteThe Capital Asset Pricing Model (CAPM) is a financial model that assumes returns on a portfolio are normally distributed. Suppose a portfolio has an average annual return of 14.7% (i.e. an average gain of 14.7%) with a standard deviation of 33%. A return of 0% means the value of the portfolio doesn’t change, a negative return means that the portfolio loses money, and a positive return means that the portfolio gains money. (a) What percent of years does this portfolio lose money, i.e. have a return less than 0%? (b) What is the cutoff for the highest 15% of annual returns with this portfolio?Stock A has an expected annual return of 18% and a volatility of 34%. Stock B has an expected annual return of 12% and a volatility of 28%. The correlation of the returns of the two stocks is equal to 0.4. Find the expected return of the efficient portfolio with a volatility of 29%. solve on paper please
- You are also given the following table of :average returns over the last 50 years T-Bills T-Bonds Stocks GeometricArithmetic GeometricArithmetic GeometricArithmetic 0.037 0.042 0.059 0.064 0.108 0.117 If you were asked to compute the equity risk premium for Steel Products, using the historical approach, what would your best estimate be? The largest investor in Steel Products is the owner/founder who owns 20% of the stock. Is she also the marginal investor in this stock? If your answer is yes write 1 and if your answer is No write 2 in the box.Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Happy Dog Soap Inc. (HDS): Five years of realized returns for HDS are given in the following table. Remember: 1. While HDS was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for HDS for 2014 to 2018 are: 2014 2015 2016 2017 2018 Stock return 8.75% 5.95% 10.50% 14.70% 4.55% Given the preceding data, the average realized return on HDS's stock is The preceding data series represents historical returns is of HDS's historical returns. Based on this conclusion, the standard deviation of HDS's If investors expect the average realized return from 2014 to 2018 on HDS's stock to continue into the future, its…