Explain how a portfolio manager can eliminate the systematic risk of his stock portfolio over the next month using futures on the S&P 500 index.
Q: James had an equity portfolio that contains $40,000 investment in Tesla (TSLA) and $60,000…
A: Value at risk: It is a measure of risk or probability of loss associated with an investment. It…
Q: You are an active investor in the securities market and you have established an investment portfolio…
A: a) The returns of the person frompast five years are The less returns are obtained in the second…
Q: Given six years of percentage return of Stock A and Stock B, identify the expected return, and risk…
A: year stock A stock B 20X1 10% 20% 20X2 -15% -20% 20X3 20% -10% 20X4 25% 30% 20X5 -30% -20%…
Q: An investor is considering purchasing a Treasury bond to add to her portfolio of 20 stocks. This…
A: Treasury bond is considered as risk free bond. So, beta of the treasury bond is equal to zero.
Q: You own a portfolio that has $2,450 invested in Stock A and $3,250 invested in Stock B. If the…
A: Expected rate of return on portfolio = [(Weight of stock A * Return on stock A) + ( weight of stock…
Q: The value of an option can be calculated by using a step-by-step approach in the case of single…
A: Given: Particulars Amount Price Spot price $30 Exercise price $25 Probability up 80%…
Q: a) Form a portfolio A that consist of a long position in a one-month put with strike K and a long…
A: Hi there, thanks for posting the questions. But as per our Q&A guidelines, we must answer the…
Q: You have a portfolio with the following: Stock Number of Shares Price Expected Return W 1,050…
A: First, we should compute the total Portfolio value and total return received. Then we should assess…
Q: On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share.…
A: Hedge refers to reducing or controlling of risk. It is a technique of offsetting of potential gains…
Q: to be unchanged for the year.) How many shares of each stock should you purchase to meet your…
A: The risk index shows the result of risk assessment or risk inherent in the investment in particular…
Q: What position in the S&P 500 futures should the manager take if he wants to reduce (rather than…
A: S&P 500 or Standard and Poor's 500 is a stock market index which tracks the performance of 500…
Q: A)Assume that the following data available for the portfolio, calculate the expected return,…
A: A mixture of different kinds of funds and securities for the investment is term as the portfolio.
Q: Complete the following table by computing correlation coefficients between stocks A and B and…
A: Average Return: It is the average of returns produced over a period of time. Standard Deviation:…
Q: The table below shows information about the performance of stocks A and B last year. Return…
A: The coefficient of variation of Stock A is 0.55 (8.3%/15%) and Stock B is 0.15 (2.1%/14%). Stock B…
Q: a) Calculate the average rate of return for each stock during the period 2004 through 2008. Assume…
A: In order to find the average rate of return and standard deviation one can use excel for all these…
Q: A company has asked you to calculate the beta for their portfolio. The portfolio has the following…
A: Beta of portfolio is weighted average beta of all stocks in portfolio.
Q: A portfolio consists of Stock X and Stock Y. Data for the 2 stocks is shown below. STOCK X…
A: The question is based on the calculation of beta value of portfolio. Portfolio Beta is weighted…
Q: A fund manager has been monitoring the performance of Virgin Galactic Corporation shares (NYSE:…
A: For call Option, A call is called in the money, if strike is lower than the spot price/current…
Q: ABC Inc stock is launching a new product tomorrow and a trader wishes to exploit this opportunity by…
A: First we will see the impact of strike price on the option prices. Impact of strike price will be…
Q: Which of the two stocks is riskier? Why? Which of the stocks is expected to yield a higher return?…
A: 1) Computation: Step 2 Hence, stock B is riskier than stock A.
Q: The following figure shows plots of monthly rates of return and the stock market for two stocks. M-…
A: well diversified portfolio is the portfolio which consist of variety of securities, the loss in one…
Q: You own a portfolio that has $2,600 invested in Stock A and $3,700 invested in Stock B. Assume the…
A: The expected return is the return of the portfolio which is the sum of each potential return that is…
Q: - Calculate the average rate of return for each stock during the period 2x15 through 2x19. Assume…
A: Realized return of a portfolio means that return which is going to be received from the portfolio.…
Q: You have been following a stock for 6 months and the following is its past return Year 1: -5%…
A: Expected return and standard deviation of a stock can be calculated using the below formula.…
Q: You have a portfolio with the following: Stock Number of Shares Price Expected Return W 1,000…
A: Portfolio is a bundle of different investments. Investor invest the money in different investment to…
Q: A stock market analyst is able to identify mispriced stocks by comparing the average price for the…
A: A stock market analyst is able to identify the stock market whether it follows the random walk or…
Q: You own a portfolio that has $1,720 invested in Stock A and $3,470 invested in Stock B. The expected…
A: The expected return of the portfolio is calculated by multiplying the weight of each asset by its…
Q: An investor owns a portfolio consisting of $450,000 of IBM shares and $550,000 of Apple shares.…
A: Hedging is a technique used to protect against the loss of Individual securities by trading in…
Q: A fund manager has been monitoring the performance of Virgin Galactic Corporation shares (NYSE:…
A: Current stock price is $34.8 Prediction:- Stock price will rise in future Underlying shares per…
Q: Consider the following scenario analysis for stocks X and Y. Assume that you have a portfolio worth…
A: PROBABILITIES STOCK X A B A X B 0.2 -20% -0.04 0.5 18% 0.09 0.3 50% 0.15 EXPECTED…
Q: You have a portfolio with the following: Stock Number of Shares Price Expected Return W 725…
A: Stock Number of share Price Investment Investment Ratio I II III = I*II IV=III/96250 W 725 46…
Q: You own a portfolio that has $2,800 invested in Stock A and $3,900 invested in Stock B. Assume the…
A: Portfolio return is the gain or loss realized investment portfolio with different stock. formula:…
Q: You are analyzing a stock that has the following returns given the various states of economy. State…
A: Working note:
Q: Based on the table below, you invested 40% on Stock A and B and 20% on Stock Calculate the expected…
A: Expected return The expected return refers to the profit or loss that is anticipated by an investor…
Q: A trader requires an estimate of the riskiness of a particular stock index over the next six months.…
A: The stock index represents the index of market of various stocks which indicates the changes in the…
Q: The returns on Relnvest Ltd. and GEM Inc. stocks over the past five months are as follows: Relnvest…
A: Given information: Returns of two stocks from January to May Reinvest Ltd GEM Inc January 15%…
Q: An investor holds stock ABC that is currently trading at $60/share and has a bearish outlook about…
A: The Bearish Outlook can be characterized as a downward trend in the stock prices of an industry or…
Q: Listed below are the annual rates of return earned on Stock X, Stock Y and Stock Z over the past 6…
A: Computation:
Q: A portfolio manager eliminates the systematic risk of his stock portfolio over the next month using…
A: Hedging can be done in multiple ways. The two techniques which can be used to hedge the portfolio…
Q: You have a portfolio with the following: Stock Number of Shares Price Expected Return W 1,025…
A: Portfolio return = Expected return for each stock * Weight of each return
Q: An investor predicts that the price of Hologic (HOLX) stock will exhibit unusually low volatility in…
A: Sell a Straddle This approach requires selling both, call and put of the identical expiration and…
Q: Stocks A and B have the following historical returns: a. Calculate the average rate of return for…
A: Answer a:
Q: Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have…
A: Portfolio is the collection of securities or investments. It is the different combination of…
Q: James had an equity portfolio that contains $40,000 investment in Tesla (TSLA) and $60,000…
A: The mathematical equation for computing: Note: Z Value of 97% confidence level is 2.17 (From Z…
Explain how a
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- A portfolio manager eliminates the systematic risk of his stock portfolio over the next month using futures on the S&P 500 index. What return does the manager expect on the hedged portfolio over the next month?fr1. Subject :- Accounting \ Graph the value of your portfolio as a function of the relevant stock price. Please create a graph for stock prices between 130 and 165. Assume today is the last day for exercising your options. Short a call at 163, long a put at 163, and long one share of the stock.What position in the S&P 500 futures should the manager take if he wants to reduce (rather than eliminate) the systematic risk of his stock portfolio by, e.g., 20% over the next month?
- Help me pleaseBelow are the annual returns of the stock A, B, C and D and the market portfolio for the period 2018-2022. Find the expected return and standard deviation of the stock A, B, C, D and the market portfolio. Asset A Asset D | 15,00 13,00 | 10,00 13,00 Prob. Asset B 9,00 Year 2018 2019 2020 2021 2022 Asset C 12,00 Market 14,00 12,00 |11,00 0,20 0,25 | 13,00 9,00 | 11,00 8,00 0,10 0,20 0,25 15,00 | 11,00 11,00 | 9,00 12,00 12,00 9,00 12,00 15,00 10,00 12,00 13,00A portfolio manager decides to adjust the beta of his $101148 equity portfolio from 0.5 to 1.3 for the next five months. The manager selects a future on the market index, which is currently traded at $487, to adjust the beta of his equity portfolio. The expectation about the market underpinning the adjustment of beta and the number of futures contracts the manager should take are: a. The market will be moving up, and a long position in 166 futures contracts should be held b. The market will be moving down and a short position in 104 futures contracts should be held c. The market will be moving down, and a long position in 270 futures contracts should be held d. The market will be moving up, and a short position in 166 futures contracts should be held Which of the following best describes the role of central clearing parties a. CCPs are used to manage price risk of futures transactions b. CCPs services are used in all OTC derivative transactions c. CCPs help market participants to…
- A prospective investor obtained the following information on XY stock: Date Stock Prices ($) Dividends Paid 4/01/2020 61.25 2/02/2020 52.38 0.75 4/05/2020 64.88 0.75 30/06/2020 70.50 0.75 25/10/2020 75.75 0.75 30/12/2020 71.00 Calculate the time-weighted rate of return using both the Linking and Index methods.You have observed the following returns over time: Stock X Stock Y Year Price Div Price Div Market Returns 2005 20 0 11 0 0 2006 24 1.2 13 1.6 0.25 2007 26 0.5 17 0.5 0.18 2008 31 1 20 0.9 0.11 2009 33 1.5 23 1.2 0.12 2010 40 2 27 1.5 0.15 Compute the portfolio return and portfolio risk if the Stock A and Stock B are combined equally in a portfolio.Below are the annual returns of the stock A, B, C and D and the market portfolio for the period 2018-2022. Find the expected return and standard deviation of the stock A, B, C, D and the market Year Prob. Asset A Asset B Asset C Asset D Market 2018 0,20 11,00 9,00 12,00 15,00 14,00 2019 0,25 13,00 11,00 15,00 13,00 12,00 2020 0,10 9,00 8,00 11,00 10,00 9,00 2021 0,20 12,00 12,00 11,00 13,00 12,00 2022 0,25 15,00 10,00 9,00 12,00 13,00
- he table below shows information for 3 stocks. Security Beta Risk-free rate Expected market return Stock 1 1.9 0.02 0.09 Stock 2 1.2 0.035 0.09 Stock 3 0.2 0.015 0.09 The risk-free rates are different because they were measured in different years. Calculate the expected (or required) return for each stock, using the Capital Asset Pricing Model (CAPM). What is the required return for stock 1? What is the required return for stock 2? What is the required return for stock 3?The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows: 00.51.01.52.020.016.012.08.04.00REQUIRED RATE OF RETURN (Percent)RISK (Beta)Return on HC's Stock CAPM Elements Value Risk-free rate (rRFrRF) Market risk premium (RPMRPM) Happy Corp. stock’s beta Required rate of return on Happy Corp. stock An analyst believes that inflation is going to increase by 2.0% over the next year, while the market risk premium will be unchanged. The analyst uses the Capital Asset Pricing Model (CAPM). The following graph plots the current SML. Calculate Happy Corp.’s new required return. Then, on the graph, use the green points (rectangle symbols) to plot the new SML suggested by this analyst’s prediction. Happy Corp.’s new required rate of return is . Tool tip: Mouse over the points on…You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year TB 2017 2018 2019 -7.00% 25.00 -13.00 2020 49.00 2021 13.00 FA -16.00% 41.00 24,00 -5.00 23.00 a. Calculate the average rate of return for each stock during the 5-year period. Do not round Intermediate calculations. Round your answers to two decimal places. Stock A: % Stock B: b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your answers to two decimal places. Negative values, if any, should be Indicated by a minus sign. Year 2017 2018 2019 % Portfolio % % % % 2020 2021 Average return c. Calculate the standard deviation of returns for each stock and for the…