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nalin [4]
3 years ago
12

Stocks 1 and 2 are selling for $100 and $125, respectively. You own 200 shares of stock 1 and 100 shares of stock 2. The weekly

returns on these stocks have means of 0.001 and 0.0015, respectively, and standard deviations of 0.03 and 0.04, respectively. Their weekly returns have a correlation of 0.35. Find the correlation matrix of the weekly returns on the two stocks and the mean and standard deviation of the weekly returns on the portfolio.
Business
1 answer:
dezoksy [38]3 years ago
6 0

Answer: covariance matrix is

(0.00090 0.00042)

(0.00042 0.00160)

Mean of weekly return = 0.00119

Standard deviation = 0.0279

VaR(0.05) = $1450.73

Explanation:

> S1 = 200*100

> S2 = 100*125

> w1 = S1/(S1+S2)

> w2 = 1 - w1

> w = c(w1,w2)

> means = c(0.001, 0.0015)

> sd = c(0.03, 0.04)

> rho = 0.35

> multiply = w %*%

means> round(mutiply by 5)=0.00119

> cov = matrix(c(sd^2, sd[1]*sd[2]*rho,sd[1]*sd[2]*rho,sd[2]^2),nrow=2) = 0.00090, 0.00042, 0.00042, 0.00160

> sdp = sqrt( w %*% cov %*% w )> round(sdp,4)=0.0279

> VaR = -(S1+S2)*(mup+sdp*qnorm(.05))

=1450.73

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Answer:

Both projects fall within the acceptable payback period, so, both projects can be accepted.

Explanation:

Cash payback period measures how long it takes for the amount invested in a project to be recovered from the cumulative cash flows.

Pay back period For project A:

Amount invested in the project = −$ 62,000

Amount recovered in year 1 = −$ 62,000 + 7,100 = $-54,900

Amount recovered in year 2 = $-54,900 + 9,800 = $-45,100

Amount recovered in year 3 = $-45,100 + 28,700 = $-16,400

Amount recovered in year 4 = $-16,400 + 45,900 = $29,500

The amount is recovered In 3 years + 16400 / 45900 = 3.36 years

Cash payback period for project B:

Amount invested in the project = −$ 26,000

Amount recovered in year 1 = −$ 26,000 + 15,600 = $-10,400

Amount recovered in year 2 = $-10,400 + 8,400 = $-2000

Amount recovered in year 3 = $-2000 + 1,900 = $-100

Amount recovered in year 4 = $-100 + 1,100 = $1000

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Both projects fall within the acceptable payback period, so, both projects can be accepted.

I hope my answer helps you

7 0
2 years ago
Logan, an employee of Argon Industries, earned a salary of $60,000 in year 2. In addition, the following two transactions betwee
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Answer:

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Explanation:

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First step is to determine the bargain element

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Bargain Element=$15 per share

Now let determine the amount of compensation

Using this formula

Compensation=Salary earned+Taded stock+(Shares of publicly traded stock*Bargain element)

Let plug in the formula

Compensation=$60,000+$13,000+($100 shares*$15 per share)

Compensation=$60,000+$13,000+$15,000

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Total Assets = $3,300,000

Debt ratio = 1,600,000/3,300,000

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3 years ago
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