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Portfolio Return and Standard Deviation: 1. Security A has an expected return of 8%t and a standard. 1 answer below » Portfolio Return and Standard Deviation: 1. Security A has an expected return of 8%t and a standard deviation of 20%. Security B has an expected return of 10% and a standard deviation of 50%. a) If you place half of your money in each stock, what is your expected return? b) If you place 30% of your money in A and the remaining 70% in B, what is your expected return? c) If the correlation between the returns of Securities A and B above is-0.5, what are the variance and the standard deviation of the returns of each of the two portfolios you found in parts a) and 1 b) above? View complete question » Portfolio Return and Standard Deviation: 1. Security A has an expected return of 8%t and a standard deviation of 20%. Security B has an expected return of 10% and a standard deviation of 50%. a) If you place half of your money in each stock, what is your expected return? b) If you place 30% of your money in A and the remaining 70% in B, what is your expected return? c) If the correlation between the returns of Securities A and B above is-0.5, what are the variance and the standard deviation of the returns of each of the two portfolios you found in parts a) and 1 b) above? Document Preview: Portfolio Return and Standard Deviation: 1. Security A has an expected return of 8%t and a standard deviation of 20%. Security B has an expected return of 10% and a standard deviation of 50%. a) If you place half of your money in each stock, what is your expected return? b) If you place 30% of your money in A and the remaining 70% in B, what is your expected return? c) If the correlation between the returns of Securities A and B above is-0.5, what are the variance and the standard deviation of the returns of each of the two portfolios you found in parts a) and 1 b) above? 2.. Security C has an expected return of 6% and a standard deviation of 3% while security D has an expected return of 10% and a standard deviation of 7%. The correlation of returns between the two securities is –1. a) If you place half of the money in each stock, then what is the expected return of this portfolio? b) If you place 20% of the money in stock C and the remaining in stock D, then what is the expected return of the portfolio? c) What is the portfolio standard deviation in b above? SML and Required Rate of Return: 3. a) A security has a beta of 1.5 when the risk-free rate is 2.6 percent and the expected return on the market is 12 percent. Calculate the expected return on the security. b) If the beta on the security in a) increases to 2.5, what is the new expected return? Why does the expected return increase as the beta increases? Features Margin: 4. Zack Wheat has just sold four September 5,000-bushel corn futures contracts at $4.95 per bushel. The initial margin requirement is 4%. a) How many dollars in initial margin must Zack put up? b) If the September price of corn rises to $5.36, how much equity is in Zack’s commodity account? Compute $ and % profit or loss. c) If the September price of corn falls to $4.50, how much equity is in Zack’s commodity account? Compute $ and % profit or loss. Features Speculation: 5. Sullivan bought 10 number of December S&P 500 index futures… Attachments: Q-Attachment…..docx View less » Aug 01 2015 01:11 PM
