Question 18 Given the data below, compute the standard deviation for stock A. En

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Question 18

Given the data below, compute the standard deviation for stock A. Enter your answer in percentages rounded off to two decimal points.Do not enter % in the answer box.

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Question 19

Stock A has a beta of 0.5. The risk-free asset has a beta of zero. The portfolio of these two securities has a beta of 0.8, what is the weight of Stock A in the portfolio?

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

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Question 20

Suppose you have a portfolio where you have invested $15515 in Stock A and Stock B. Stock A has an expected return of 19.6% and Stock B has an expected return of 6.3%. If your goal is to create a portfolio with an expected return of 10.1%, what is your dollar investment in Stock B?

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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Question 21

Given the data below, compute the standard deviation for stock A. Enter your answer in percentages rounded off to two decimal points.Do not enter % in the answer box.

Event Probability Returns Pessimistic 30% 12% Most Likely 45% -15% Optimistic 25% 5%

Explanation / Answer

(18)

Event Probability Returns

Pessimistic 30% 12%

Most Likely 45% 15%

Optimistic 25% 5%

Expected Return (mean return) = 0.3 x 12 + 0.45 x 15 + 0.25 x 5 = 11.6 %

Variance of Stock A = SUM [0.3 x (12 - 11.6)^(2) + 0.45 x (15 - 11.6)^(2) + 0.25 x (5 - 11.6)^(2)] = 16.14

Standard Deviation of Stock A = [Variance of Stock A]^(1/2) = (16.14)^(1/2) = 4.0175 % approximately.

NOTE: Please raise separate queries for solutions to the remaining unrelated questions.

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