• March 12th, 2016

Finance

Paper, Order, or Assignment Requirements

7-An analyst estimates that a risky portfolio has the following probabilities of return depending on the state of the economy:

 

State of Economy                  Probabilities             Return

Boom                                         0.40                              15%

Normal                                      0.50                              13%

Recession                                  0.10                              7%

 

  1. What is expected return of the portfolio?

 

  1. What is the standard deviation of the portfolio?

 

  1. Give the expected return and standard deviation you calculated in part (a)and (b)

 

 

  1. Please provide an interpretation of your calculated 5% VaR in part

(c).

 

9-Suppose you purchased ABC stock 4 years ago and your purchasing price was $40. The ABC  stock price went up and down  in the past 4 years in the following sequence :$50, $38, $28 and $49. Assume no dividend is equal and risk free rate 1%.

 

  1. Calculate holding period returns for year 1,2,3,and 4 respectively.
  2. Suppose we have no probability profile about future scenarios. Calculate the expected rate of return of holding ABC stock for the next year.
  3. Please calculate the standard deviation of ABC stock (please provide either calculation process via formula or calculator input process)
  4. Please calculate downside risk of ABC stock (please provide either calculation process via formula or calculator input process)
  5. What is the sharp ratio for ABC stock?

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