1. A stock has had returns of 16.12%, 22.11%, -25.00%, 26.14%, and 16.00% over the past five years. What was the holding period return for the stock?
a. 55.61%
b. 155.61%
c. 50.67%
2. 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?
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|
Stock X
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Stock Y
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|
Expected Return
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14.0%
|
9.0%
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Goal Return of Portfolio: 12.90%
Dollar Amount to Invest: $10,000
a. X = $7,800; Y = $2,200
b. X = $2,200; Y = $7,800
c. X = $6,800; Y = $3,200
3. Your stock portfolio contains 4 stocks with the following betas and weight as a percentage of your portfolio. What is the portfolio beta?
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Weight
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Beta
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Stock A
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30 pct..
|
1.80
|
|
Stock B
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35 pct..
|
1.50
|
|
Stock C
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15 pct.
|
1.38
|
|
Stock D
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20 pct.
|
0.80
|
a. 1.43
b. 1.37
c. 1.40
4. Based on the following information determine the covariance and correlation between the returns of the two stocks.
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State of Economy
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Probability of State of Economy
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Return of X
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Return of Y
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|
Bear
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0.10
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-0.03
|
0.05
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|
Normal
|
0.65
|
0.11
|
0.062
|
|
Bull
|
0.25
|
0.25
|
0.092
|
a. Cov = 0.001086, Corr=0.9589
b. Cov = 0.001086, Corr=0.00019
c. Cov= 0.001092, Corr=0.9327