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# Suppose you invest \$7,000 in Stock A and \$3,000 in Stock B.

Question # 00622070
Subject: Finance
Due on: 11/25/2017
Posted On: 11/25/2017 12:44 PM

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1.Suppose you invest \$7,000 in Stock A and \$3,000 in Stock B. The variance of Stock A is 50 percent, the variance of Stock B is also 50 percent, and the covariance between the two stocks is 0 percent. What is the variance of your portfolio in percent?

2.Suppose that you currently have \$250,000 invested in a portfolio with an expected return of 12 percent and a standard deviation of 10 percent. The risk-free rate of interest is 5 percent.

The Sharpe ratio for your portfolio is:

3.You are an active portfolio manager for a large hedge fund. The overall return on your portfolio for the year is 25 percent. What is your fund's alpha if the the risk-free rate is 5 percent, the Beta for you portfolio is 1.50 and the market risk premium is 10 percent?

4.Suppose an investment has a 50 percent chance to have a 40 percent return and a 50 percent chance to have a 20 percent return. What is the expected return for this investment?

5.Suppose an investment has a 50 percent chance to have a 40 percent return and a 50 percent chance to have a 20 percent return. What is the standard deviation of the return for this investment?

6.Consider two stocks X and Y with the following expected returns (in percent) and standard deviations. How much of your \$10,000 total investment should you invest in stock Y if you would like a portfolio with an expected return of 18 percent?

StockExpected return Standard deviation

X 10 25

Y 20 50

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#### Suppose you invest \$7,000 in Stock A and \$3,000 in Stock B.

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Posted On: 11/25/2017 12:45 PM
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