I am completely lost, cannot find none of the answers to these questions

Question 1 Suppose your expectations regarding the stock market are as follows: State of the Economy Boom Normal growth Recession Probability 0.3 0.4 0.3 HPR 44% 14 -16 Compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Question 2 The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Boom Normal economy Recession Dividend $2.00 1.00 .50 Stock price $50 43 34 a. Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equally likely. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected return Standard deviation % % b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 4%. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected return Standard deviation % % Question 3 XYZ stock price and dividend history are as follows: Year 2010 2011 2012 2013 Beginning-of-Year Price $ 100 $ 110 $ 90 $ 95 Dividend Paid at Year-End $4 $4 $4 $4 An investor buys three shares of XYZ at the beginning of 2010, buys another two shares at the beginning of 2011, sells one share at the beginning of 2012, and sells all four remaining shares at the beginning of 2013. a. What are the arithmetic and geometric average time-weighted rates of return for the investor? (Do not round intermediate calculations. Round your answers to 2 decimal places.) % Arithmetic mean % Geometric mean b-1. Prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2010, to January 1, 2013. (Negative amounts should be indicated by a minus sign.) Date 1/1/2010 Cash Flow $ 1/1/2011 1/1/2012 1/1/2013 b-2. What is the dollar-weighted rate of return? (Hint: If your calculator cannot calculate internal rate of return, you will have to use a spreadsheet or trial and error.) (Negative value should be indicated by a minus sign. Round your answer to 4 decimal places.) Rate of return % Question 4 Suppose you forecast that the standard deviation of the market return will be 20% in the coming year. If the measure of risk aversion in is A = 4. a. What would be a reasonable guess for the expected market risk premium? Market risk premium % b. What value of A is consistent with a risk premium of 9%? (Round your answer to 2 decimal places.) Consistent value of A c. What will happen to the risk premium if investors become more risk tolerant? Increased risk tolerance means decreased risk aversion (A), which results in a(n) in risk premiums. (Click to select) Question 5 Using the as your guide, what is your estimate of the expected annual HPR on the S&P 500 stock portfolio if the current risk-free interest rate is 5%? (Round your answer to 2 decimal places.) Expected annual HPR % Question 6 Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $50,000 or $150,000, with equal probabilities of .5. The alternative riskless investment in T-bills pays 5%. a. If you require a risk premium of 10%, how much will you be willing to pay for the portfolio? (Round your answer to the nearest dollar amount.) Value of the portfolio $ b. Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the portfolio be? (Do not round intermediate calculations. Round your answer to the nearest whole percent.) % Rate of return c. Now suppose you require a risk premium of 15%. What is the price you will be willing to pay now? (Round your answer to the nearest dollar amount.) Value of the portfolio $ Question 7 Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. a. What is the expected return and standard deviation of your client's portfolio? (Round your answers to 1 decimal place.) Expected return Standard deviation % per year % per year b. Suppose your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 27% 33% 40% What are the investment proportions of your client's overall portfolio, including the position in T-bills? (Round your answers to 1 decimal place.) Security Investment Proportions T-Bills % Stock A % Stock B % Stock C % c. What is the reward-to-volatility ratio (S) of your risky portfolio and your client's overall portfolio? (Round your answers to 4 decimal places.) Reward-to-Volatility Ratio Risky portfolio Client's overall portfolio Question 8 Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 27 % 33 % 40 % Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 15%. a. What is the proportion y? (Round your answer to 1 decimal place.) Proportion y b. What are your client's investment proportions in your three stocks and the T-bill fund? (Round your answers to 1 decimal place.) Security T-Bills Stock A Stock B Stock C Investment Proportions % % % % c. What is the standard deviation of the rate of return on your client's portfolio? (Round your answer to 1 decimal place.) Standard deviation % per year Question 9 Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 13% with a standard deviation of 25%. a. What is the slope of the CML? (Round your answer to 2 decimal places.) Slope of the CML Question 10 You manage an equity fund with an expected risk premium of 10% and a standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest $60,000 of her portfolio in your equity fund and $40,000 in a T-bill money market fund. What is the expected return and standard deviation of return on your client's portfolio? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Expected return Standard deviation % % Chapter 6 Homework Problem 1 Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Probability .05 .25 .40 .30 Stock Fund Bond Fund Rate of Return Rate of Return -40% -9% -14% 15% 17% 8% 33% -5% 1. Calculate the values of mean return and variance for the stock fund. 2. Calculate the value of the covariance between the stock and bond funds. Problem 2 A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Stock fund (S) Bond fund (B) Expected Return 15% 9% Standard Deviation 32% 23% The correlation between the fund returns is .15. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? Problem 3 A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Stock fund (S) Bond fund (B) Expected Return 15% 9% Standard Deviation 32% 23% The correlation between the fund returns is .15. What is the expected return and standard deviation of the optimal risky portfolio? Problem 4 A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Expected Return 15% 9% Stock fund (S) Bond fund (B) Standard Deviation 32% 23% The correlation between the fund returns is .15. The reward-to-variability ratio (Sharpe ratio) of the optimal CAL is? Problem 5 A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Expected Return 15% 9% Stock fund (S) Bond fund (B) Standard Deviation 32% 23% The correlation between the fund returns is .15. Suppose now that your portfolio must yield an expected return of 12% and be efficient, that is, on the best feasible CAL. 1. What is the standard deviation of your complete portfolio? Please note that the expected return of the complete portfolio is given to us by this formula E(rC) = rf + E(rP) - rf C P 2. What is the proportion invested in the T-bill fund? 3. What is the proportion invested in stock fund and what is the portion invested in bond fund? Problem 6 A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a longterm government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Stock fund (S) Bond fund (B) Expected Return 15% 9% Standard Deviation 32% 23% The correlation between the fund returns is .15. Assume now that the expected return of the risky portfolio is 12%. 1. What would be the investment proportions of your portfolio in bonds and in stocks? 2. Calculate the standard deviation of the risky portfolio which yields an expected return of 12% Problem 7 Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, r. The characteristics of two of the stocks are as follows: Stock Expected Return A 8% B 13% Correlation coefficient = -1 Standard Deviation 40% 60% 1. Calculate the expected rate of return on this risk-free portfolio? (Hint: Can a particular stock portfolio be substituted for the risk-free asset?) 2. Could the equilibrium r be greater than 10%? Problem 8 Your assistant gives you the following diagram as the efficient frontier of the group of stocks you asked him to analyze. The diagram looks a bit odd, but your assistant insists he double-checked his analysis. 1. Would you trust him? 2. Is it possible to get such a diagram? Problem 9 A project has a 0.7 chance of doubling your investment in a year and a 0.3 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? Problem 10 The following figure shows plots of monthly rates of return and the stock market for two stocks. 1. Which stock is riskier to an investor currently holding her portfolio in a diversified portfolio of common stock? 2. Which stock is riskier to an undiversified investor who puts all of his funds in only one of these stocks