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kow [346]
3 years ago
7

Stock X has a standard deviation of return of 10%. Stock Y has a standard deviation of return of 20%. The correlation coefficien

t between stocks is 0.5. If you invest 60% of the funds in stock X and 40% in stock Y, what is the standard deviation of the portfolio?A. 10%B. 20%C. 1.48%D. 12.20%
Business
1 answer:
ValentinkaMS [17]3 years ago
8 0

Answer:

D. 12.20%

Explanation:

Stock X Weight = 0.60

Stock Y Weight = 0.40

sdX = 10%

sdY = 20%

Portfolio Variance = w2X*sd2(X) + w2X*sd2(Y) + 2*(wX)*(wY)*Cov(X, Y)

Where: wX and wY are portfolio weights, sd2(X) and sd2(Y) are variances and

Cov(X, Y) is the covariance

Correlation = 0.5

Cov(X, Y) = Correlation * sd(X) * sd(Y)

= 0.50 * 0.10 * 0.20

= 0.01

Portfolio Variance = 0.60^2 * 0.10^2 + 0.40^2 * 0.20^2 + 2 * 0.60 * 0.40 * 0.01

Portfolio Variance = 0.0036 + 0.0064 + 0.0048

Portfolio Variance = 0.0148

sd(P) = √Variance = 0.121655 = 12.20%

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Answer:

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3 years ago
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ruslelena [56]

Answer:

Share price : $ 56.23

Explanation:

CAPM

Ke= r_f + \beta (r_m-r_f)

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market rate = 0.11

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Ke 0.14840

Now, we solve for the present value of the future dividends:

year   dividend*     present value**

1  2.91                 2.53

2  3.31                 2.51

3  3.78         2.49

4  4.31                 2.48

4   80.38          46.22

TOTAL            56.23

*Dividends will be calculate as the previous year dividends tiems the grow rate

during the first four year is 14%

then, we calcualte the present value of all the future dividends growing at 9% using the dividend grow model:

\frac{D_1}{K_e-g}

(4.31 x 1.09) / (0.1484 - 0.09) = 80.38

Then we discount eahc using the present value of a lump sum:

\frac{Cashflow}{(1 + rate)^{time} } = PV

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4 0
3 years ago
Changes in accounting estimates are: Multiple Choice Extraordinary items. Accounted for with a cumulative "catch-up" adjustment.
Tom [10]

Answer:

The answer is D. Accounted for in current and future periods.

Explanation:

A change in accounting estimate is an adjustment of the carrying value of an asset or liability arising from reassessing the expected future economic benefits and obligations associated with that asset or liability.

Changes in accounting estimates must be shown in the accounting period in which the estimates are revised and periods after i.e accounted for prospectively. Example is a change in useful life and salvage value of a fixed asset

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Carolina is the vice president of the environmental club at her high school. She is in charge of e-mailing members about upcomin
Basile [38]

Answer:

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