Question
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
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