Make up an example of two different investments where one has a higher dollar gain but a lower HPR.
Which type of risk need we not worry about so much and why?
You currently hold shares of stock A and are considering adding either stock B or Stock C to your holdings. Make up correlation coefficients between A and B and between A and C and then indicate which stock you should add in order to minimize the risk of your portfolio.
Stock A has an expected return of 8% and a standard deviation of 10%. Make up three different sets of values for these two variables for a stock that a rational risk-averse investor would consider to be (a) better than A; (b) inferior to A; and (c) for which the investor would be indifferent between it and stock A.
If the MRP is 7 percentage points and the risk-free rate is 2%, what is the expected return on the market?
Make up an example of two different investments where one has a higher dollar gain but a lower HPR.
Which type of risk need we not worry about so much and why?
You currently hold shares of stock A and are considering adding either stock B or Stock C to your holdings. Make up correlation coefficients between A and B and between A and C and then indicate which stock you should add in order to minimize the risk of your portfolio.
Stock A has an expected return of 8% and a standard deviation of 10%. Make up three different sets of values for these two variables for a stock that a rational risk-averse investor would consider to be (a) better than A; (b) inferior to A; and (c) for which the investor would be indifferent between it and stock A.
If the MRP is 7 percentage points and the risk-free rate is 2%, what is the expected return on the market?
Related questions
- Consider two stocks, A and B.
|
|
Expected return (%) |
Standard deviation (%) |
|
Stock A |
24 |
28 |
|
Stock B |
19 |
23 |
The returns on the two stocks have a positive correlation of 0.6. You are required to calculate the portfolio return and risk.
Suppose that the investor wants to reduce the portfolio risk to 15%. How much should the correlation coefficient be to bring the portfolio risk to the desired level?
