Question
For the final answers, round your answer to the nearest 2 decimal places (3 decimals for the reward-to-risk ratio and 2 for the beta-coefficient). If
For the final answers, round your answer to the nearest 2 decimal places (3 decimals for the reward-to-risk ratio and 2 for the beta-coefficient). If you need to use a calculated number for further calculations, DO NOT round until after all calculations have been completed.
1. The market risk premium for next period is 9.23% and the risk-free rate is 1.01%. Stock Z has a beta of 1.37 and an expected return of 9.32%. What is Stock Z's reward-to-risk ratio? (For this problem, please list your answer in decimal format to 3 places. For example, if your answer is 12.3%, then enter it as 0.123).
2. There is a 37.30% probability of a below average economy and a 62.70% probability of an average economy. If there is a below average economy stocks A and B will have returns of -1.00% and 19.10%, respectively. If there is an average economy stocks A and B will have returns of 15.30% and 2.60%, respectively. Compute the:
- Expected Return for Stock A:
- Expected Return for Stock B:
- Standard Deviation for Stock A:
- Standard Deviation for Stock B:
3. There is a 15.30% probability of an average economy and a 84.70% probability of an above average economy. You invest 41.70% of your money in Stock S and 58.30% of your money in Stock T. In an average economy the expected returns for Stock S and Stock T are 10.70% and 9.80%, respectively. In an above average economy the the expected returns for Stock S and T are 33.40% and 27.90%, respectively. What is the expected return for this two stock portfolio?
4. You are invested 29.30% in growth stocks with a beta of 1.70, 32.60% in value stocks with a beta of 1.06, and 38.10% in the market portfolio. What is the beta of your portfolio?
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