08 Jun Question Based on the following information determine the covariance and correlation between the returns of the two stocks.
Question
Based on the following information determine the covariance and correlation between the returns of the two stocks.
State of Economy Probability of State of Economy Return of X Return of Y
Bear 0.35 -0.02 0.034
Normal 0.60 0.138 0.062
Bull 0.05 0.218 0.092
Cov = 0.001243,Corr=0.9794
Cov = 0.001243,Corr=0.00025
Cov= 0.001469,Corr=0.9610
Your stock portfolio contains 4 stocks with the following betas and weight as a percentage of your portfolio. What is the portfolio beta?
Weight Beta
Stock A 10 pct. 0.75
Stock B 35 pct. 1.90
Stock C 20 pct. 1.38
Stock D 35 pct. 1.16
1.42
1.30
1.36
You are constructing a two stock portfolio based on the information provided below. What dollar amount will you invest in each stock to achieve the desired return goal?
Stock X Stock Y
Expected Return 14.0% 9.0%
Goal Return of Portfolio: 10.00%
Dollar Amount to Invest: $20,000
X = $4,000; Y = $16,000
X = $16,000Y = $4,000
X = $13,600; Y = $6,400
A firm you are analyzing has had the following returns the past 5 years: 27.0%, 33.0%, -40.0%, -14.0% and 22.0 %. What are the standard deviation and variance of the past five year returns?
0.3139, 0.0985
0.2808, 0.0788
0.3139, 0.0788
A stock has had returns of 16.12%, 12.11%, 5.83%, 26.14%, and -13.19% over the past five years. What was the holding period return for the stock?
50.86%
150.86%
58.04%
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