Consider;
Use the Edit menu in your browser to copy the 1000 numbers obtained
in the coin tossing experiments.
(d) Go back to LinuStats and choose the descriptive statistics page.
(e) Use the Edit menu in your browser to paste the 1000 numbers into the
data window.
(f) Choose a minimum value of 0, maximum value of 1, and window of
0.1
(g) Analyze the data by clicking the appropriate button.
(h) Copy the resulting relative frequency table and transform it into a cumulative distribution function
(i) Copy the Mean and SD (Standard Deviation) of the 1000 numbers.
Explain what this standard deviation means. I'll call these numbers
X and ?X
(j) Compare the obtained cumulative distribution function with that predicted by a Gaussian distribution with mean X and standard deviation
?X
Portfolio return and standard deviation Personal Finance Problem Jamie Wong is considering building an investment portfolio containing two stocks, L and M. Stock L will represent 30% of the dollar value of the portfolio, and stock M will account for the other 70%. The expected returns over the next 6 years, 2015- 2020, for each of these stocks are shown in the following table: - . Calculate the expected portfolio retum, rs, for each of the 6 years. . Calculate the expected value of portfolio returns, (s, over the 8-year period. Calculate the standard deviation of expected portfolio returns, a, . over the 6-year period. d. How would you characterize the correlation of returns of the two stocks L and M? e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio. a. The expected portfolio return for year 2015 is ]%:. (Round to two decimal places.) The expected portfolio retum for year 2016 is ]%. (Round to two decimal places.) Data Table - X The expected portfolio retum for year 2017 is %. (Round to two decimal places.) The expected portfolio retum for year 2018 is |%%. (Round to two decimal places.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) The expected portfolio return for year 2019 is ]%. (Round to two decimal places.) Expected return Year Stock L Stock M The expected portfolio retum for year 2020 is |]%. (Round to two decimal places.) 2015 18% 20% 2016 18% 18% b. The expected value of portfolio returns. . over the 8-year period is |]%. (Round to two decimal places.) 2017 20% 16% 2018 14% 2019 20% c. The standard deviation of expected portfolio returns, or. . over the 6-year period is ]::. (Round to two decimal places.) 2020 21% 10% d. How would you characterize the correlation of returns of the two stocks L and M? (Select the best answer below) Print Done O A. The assets are positively correlated. O B. The assets are negatively correlated e. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio. (Select the best answer below.) A. Combining these two negatively correlated assets increases overall portfolio risk. O B. Combining these two positively correlated assets reduces overall portfolio risk. O C. Combining these two negatively correlated assets reduces overall portfolio risk. D. Combining these two positively correlated assets increases oversil portfolio risk.Question 4 (20 marks) ABC Company treats dividends as a residual decision. It expects to generate $3 million in net earnings after taxes in the coming year. The company has an all-equity capital structure, and its cost of equity capital is 16 percent. The company treats this cost as the opportunity cost of internal equity financing (retained earnings). Because of flotation costs and underpricing, external equity financing (issue of new common stock) is not relied on until internal equity financing is exhausted. a) How much in dividends (out of the $3 million in earnings) should be paid if the company has $2.1 million in projects whose expected returns exceed 16 percent? (6 marks) b) How much in dividends should be paid if it has $3 million in projects whose expected returns exceed 16 percent? (5 marks) c) How much in dividends should be paid if it has $4 million in projects whose expected returns exceed 30 percent? (5 marks) What else should be done? (4 marks)Stock Portfolio Weight Expected Return Standard Deviation Stock X 0.75 18.0% 35.0% Stock Y 0.25 11.0% 35.0% What is the portfolio's expected return? 16.25% 15.55% 13.80% 12.75% 14.15% Suppose Stocks X and Y are perfectly, positively correlated (r = 1). What is the portfolio's standard deviation of returns? 50% 20% O 35% 70% 0% If you added randomly selected stocks to the portfolio, the portfolio's standard deviation would If a portfolio has no firm-specific risk remaining, which of the following is the best estimate of the standard deviation of returns? 70% O 35% O 50% 0% O 20% The tradeoff between risk and return is a cornerstone concept in finance. If a security offers a higher expected return, it must have higher risk. Look at the two stocks described in this problem. They have the same risk, but one stock has a higher expected return. Does this example contradict the tradeoff between risk and return? Nonance FIN5018119021 May You have a sample of returns observations for the Kuwait Stock Fund. The four returns are 8 percent, 6 percent, 12 percent, 4.0 percent. What is the variance of these returns? of 4.00 stion Select one: a. 46 b. 35 c. 42 d. 66 De. 28
