After real estate is added to the portfolio‚ there are four asset classes in the portfolio: stocks‚ bonds‚ cash and real estate. Portfolio variance now includes a variance term for real estate returns and a covariance term for real estate returns with returns for each of the other three asset classes. Therefore‚ portfolio risk is affected by the variance (or standard deviation) of real estate returns and the correlation between real estate returns and returns for each of the other asset classes
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expected return for each unit of risk. The calculation is based on forecasts of each asset’s long-term return and volatility and correlations among the various assets. Method showed how the variances of individual stock returns and the correlations of those returns can be combined to calculate a value for the variance of a portfolio made up of those stocks. Based on the received data of possible asset allocation we were able to draw an efficient frontier. The efficient frontier is the curve that shows
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and b E. neither a nor b 2.Assume that stock market returns do follow a single-index structure. An investment fund analyzes 500 stocks in order to construct a mean-variance efficient portfolio constrained by 500 investments. They will need to calculate ________ estimates of firm-specific variances and ________ estimates for the variance of the macroeconomic factor. A. 500; 1 B. 500; 500 C. 124‚750; 1 D. 124‚750; 500 E. 250‚000; 500 3.Suppose you held a well-diversified portfolio with a very
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SAMPLE Population – the group of ALL people or objects that are under study Sample – a sub-set of the population Parameter – a numerical characteristic of a population 1. Population & Sample Means 2. Expected Values 3. Population & Sample Variances 4. Population & Sample Covariances 5. Population & Sample Correlation Coefficients 6. Estimators Statistic – a numerical characteristic of a sample Statistical inference – drawing conclusion about a population based on information contained
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would it affect the graph if the broker were to charge the full amount of the fee? 4. Derive the optimum portfolio weights for a portfolio with two uncorrelated assets. 5. Suppose there n mutually uncorrelated assets. The return on asset i has variance i2 ‚ i 1‚2‚...‚ n but the expected rates of return are unspecified at this point. The weight of asset i in the market portfolio is xi ‚ i 1‚2‚...‚ n . Assume there is a risk-free asset with rate of return
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Charismatic Condition Mean 4.204081633 Standard Error 0.097501055 Median 4.2 Mode 4.8 Standard Deviation 0.682507382 Sample Variance 0.465816327 Kurtosis 5.335286065 Skewness -1.916441174 Range 3.5 Minimum 1.5 Maximum 5 Sum 206 Count 49 Confidence Level(95.0%) 0.196039006 In both the Charismatic and the punitive condition data sets there were 49 people surveyed. We know this because we were able to use descriptive statistics to show the count and that shows the number of people
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Both the interest rate‚ r‚ and variance rate‚ δ2‚ of the stock are constant (or in slightly more general versions of the formula‚ both are known functions of time—any changes are perfectly predictable). 3). Stock prices are continuous‚ meaning that sudden extreme jumps such as those in the aftermath of an announcement of a takeover attempt are ruled out. In this case‚ we do not take paying dividends into consideration. And we all set risk-free rate and variance rate are constant. But actually
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7) Data from a small bookstore are shown in the accompanying table. The manager wants to predict Sales from Number of Sales People Working. Number of sales people working | Sales (in $1000) | 4 | 12 | 5 | 13 | 8 | 15 | 10 | 16 | 12 | 20 | 12 | 22 | 14 | 22 | 16 | 25 | 18 | 25 | 20 | 28 | x=11.9 | y=19.8 | SD(x)=5.30 | SD(y)=5.53 | a) Find the slope estimate‚ b1. Use technology or the formula below to find the slope. b1=rsysx Enter x‚y Data in TI-84 under STAT > STAT
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ANALYZING A PORTFOLIO a 58. You want your portfolio beta to be 1.20. Currently‚ your portfolio consists of $100 invested in stock A with a beta of 1.4 and $300 in stock B with a beta of .6. You have another $400 to invest and want to divide it between an asset with a beta of 1.6 and a risk-free asset. How much should you invest in the risk-free asset? a. $0 b. $140 c. $200 d. $320 e. $400 ANALYZING A PORTFOLIO d 59. You have a $1‚000 portfolio which is invested in stocks A
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a.The mean return should be less than the value computed in the spreadsheet. The fund’s return is 5% lower in a recession‚ but only 3% higher in a boom. The variance of returns should be greater than the value in the spreadsheet‚ reflecting the greater dispersion of outcomes in the three scenarios. b.Calculation of mean return and variance for the stock fund: (A) (B) (C) (D) (E) (F) (G) Scenario Probability Rate of Return Col. B Col. C Deviation from Expected Return Squared Deviation Col. B
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