Finance MBA help Risk and Return

/in /by

1. 

What is the expected return for an asset with the following probabilities and returns:

Economy  Probability  Return
Poor   10%  -20%
Sluggish  25%  -5%
Moderate  30%  12%
Good  25%  24%
Boom  10%  55%

2. 

What is the standard deviation of the returns for a stock with the following probabilities and returns:

Economy  Probability  Return
Poor   10%  -20%
Sluggish  25%  -5%
Moderate  30%  12%
Good  25%  24%
Boom  10%  55%

3. 

What is the expected return for an asset with annual returns for the last 12 years of:
4.5%
6.9%
-13.2%
18.9%
24.9%
-3.8%
14.2%
-18.7%
1.9%
6.8%
14.1%
37.2%

4. 

 What is the standard deviation for the following sample of asset returns:
4.5%
6.9%
-13.2%
18.9%
24.9%
-3.8%
14.2%
-18.7%
1.9%
6.8%
14.1%
37.2%

5. 

What is the portfolio beta for a pool of investments as follows:
Asset  Investment  Beta
A  $1,000  .75
B  $2,000  1.20
C  $3,000  1.95

6. 

What is the beta for an asset with an expected return of 12.5% if the risk free rate is 2.0% and the market risk premium is 7.5%?

7. 

 What is the expected return for an asset with a beta of 1.1 if the risk free rate is 1.5% and the required rate of return on the market is 9.5%?

8. 

The tighter the probability distribution of its expected future returns, the greater the risk of a given investment as measured by its standard deviation.

9. 

You are considering investing in one of the these three stocks:

Stock

Standard Deviation

Beta

A

20%

0.59

B

10%

0.61

C

12%

1.29

If you are a strict risk minimizer, you would choose Stock ____ if it is to be held in isolation and Stock ____ if it is to be held as part of a well-diversified portfolio.

10. 

Stock A’s beta is 1.7 and Stock B’s beta is 0.7. Which of the following statements must be true about these securities? (Assume market equilibrium.)

11. 

Which of the following statements is CORRECT?