Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I am stuck. Can someone show me how to do these? Joey wants to compile a portfolio valued at $1,000 which will be invested in

I am stuck. Can someone show me how to do these?

Joey wants to compile a portfolio valued at $1,000 which will be invested in Stocks A and B plus a risk-free asset. Stock A has a beta of 1.3 and Stock B has a beta of .7. If you invest $300 in Stock A and want a portfolio beta of .9, how much should you invest in Stock B?

$857.14

$771.43

$333.33

$728.57

$633.33

Joey's stock is quite cyclical. In a boom economy, the stock is expected to return 26 percent in comparison to 12 percent in a normal economy and a negative 20 percent in a recessionary period. The probability of a recession is 15 percent while it is 30 percent for a booming economy. The remainder of the time, the economy will be at normal levels. What is the standard deviation of the returns?

34.63 percent

15.53 percent

15.83 percent

33.35 percent

14.56 percent

Joey's portfolio has 45 percent of its funds invested in Security One and 55 percent invested in Security Two. Security One has a standard deviation of 6 percent. Security Two has a standard deviation of 12 percent. The securities have a coefficient of correlation of .54. What is the portfolio variance?

.007295

.007010

.006047

.272385

.138735

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Wealth Habits Six Ordinary Steps To Achieve Extraordinary Financial Freedom

Authors: Candy Valentino

1st Edition

1394152299, 978-1394152292

More Books

Students also viewed these Finance questions

Question

Find the derivative of y= cos cos (x + 2x)

Answered: 1 week ago