3- Suppose you had $100,000 in investments at the beginning of the year that consisted of a diversified portfolio of stocks (60 percent) and bonds (40 percent). The returns over the past 12 months were 17 percent on stocks and 8 percent on bonds. a) What is the portfolio return for the year? b) If you wanted to rebalance this portfolio to its original position, what specific actions should you take? 4- You invested a total of $10,000 in two stocks ($5,000 in each) with different betas: stock A with a beta of 1.15 and stock B with a beta of 2.86. a) If the stock market rises 10 percent over the next year, what will be the value of each investment? b) If the stock market declines 10 percent over the next year, what will be the value of each investment?

Problem 3:Here are the annual returns for five different stocks. Determine the expected return and risk for a period of five years for each of the stocks.        Problem 4:a. Find the coefficient of variation (CV) for each of the actions in problem 3.b. Explain which of the investments a risk averse investor would prefer and which a risk lover investor would prefer. Answer clearly and in detail. Show all the computations that led to the result.

Suppose you purchase 2 shares of Canadian Tire Corp. today at $11 per share. At the end of year 1 you receive $1 per share in dividends and you also buy 3 shares at $9 per share. At the end of year 2 you again receive $1 dividend per share and then you sell all your shares at $14 per share. The time-weighted geometric average return on this portfolio is approximately: a.27.1% b.18.9% c.19.5% d.31% e.23.1%

You like to keep your investment risks at a 85-10-5 proportion (stocks-bonds-cash). After the first year, your $12,000 investment doubled in value to $24,000, with $21,000 in stock, $2,000 in bonds, and $1,000 in cash. How should you allocate your assets to maintain your original goals and rebalance your portfolio to retain the 85-10-5 proportion in investments? (Input all amounts as positive values.) Stocks Bonds Cash Allocation: Original goals Action to rebalance Rebalance

Considering the attached set of securities and portfolio returns: Assume that you initially invested $1,000,000 in the portfolio and that the distribution of the annual rate of return of the portfolio is normal.  What is the distribution of the return of the portfolio 20 years after its formation?  Provide the graph of the distribution of the return of the portfolio.

Review the excerpted table of historic returns shown below.  The returns have all been annualized after having calculated monthly returns for the previous five years.  In addition, information is provided about the average, the volatility, and the sensitivity of the possible investments.                             Time Period # Market Return Firm W Firm X Firm Y Firm Z T-Bill 1 0.333 0.191 0.218 0.955 0.601 0.035 2 -0.144 -0.423 -0.632 -0.747 -0.472 0.039 3 0.143 0.348 0.470 0.379 0.378 0.040 4 0.316 0.871 0.868 -0.192 0.502 0.036 5 0.178 0.912 0.499 0.694 0.364 0.036 6 -0.014 0.532 0.168 -0.671 -0.064 0.038 … … … … … … … … … … … … … … 59 0.374 0.556 1.014 0.023 0.698 0.037 60 0.173 0.547 0.092 0.658 0.222 0.036               Average Return 0.082 0.113 0.067 0.167 0.121 0.029 Standard…

During the last year, you had investments in the following three stocks: Stock Amount Invested Beta Actual Return A $49,500 $110,000 $44,000 1.09 12% B 0.68 7% (0.45) 3% During the same year, the risk-free rate was 5% and the return on the market portfolio was 12%. (1) What is the actual return earned by your portfolio? (1i) What is the beta of your portfolio? (2 s (lii) Using the beta calculated in (ii) above, calculate tte required return on your portfolio

13 You invested 10 000 USD and your dividends are 2.1 % and capital appreciation is 7.4%. Calculate the value of your portfolio assuming that a) Ending investment value, no reinvestment, and assuming dividends are paid at year end b.         Ending investment value, with reinvestment, and assuming dividends are paid at year end. (Again, this is simpler to solve using Excel or other spreadsheet. Furthermore, the numbers as shown may not add to the actual amounts shown due to rounding error.)

Review the excerpted table of historic returns shown below.  The returns have all been annualized after having calculated monthly returns for the previous ten years.  In addition, information is provided about the average, the volatility, and the sensitivity of the possible investments.                             Time Period # Market Return Firm W Firm X Firm Y Firm Z T-Bill 1 0.333 0.191 0.218 0.955 0.601 0.035 2 -0.144 -0.423 -0.632 -0.747 -0.472 0.039 3 0.143 0.348 0.470 0.379 0.378 0.040 4 0.316 0.871 0.868 -0.192 0.502 0.036 5 0.178 0.912 0.499 0.694 0.364 0.036 6 -0.014 0.532 0.168 -0.671 -0.064 0.038 … … … … … … … … … … … … … … 119 0.374 0.556 1.014 0.023 0.698 0.037 120 0.173 0.547 0.092 0.658 0.222 0.036               Average Return 0.082 0.113 0.067 0.167 0.121 0.029 Standard…

Consider two asset classes: Stocks and Bonds. You estimate the following parameters for these two asset class funds. correlation matrix b/n Stocks and Bonds E(r ) sd(r) Stocks Bonds Stocks 19% 28% 10.5 Bonds 10% 8% 0.5 1 Consider a $80,000 portfolio consisting of $60,000 in Stocks and $20,000 in Bonds. So, the portfolio is 75% in Stocks and 25% in Bonds. Given the expected return on the portfolio is 16.75%, and the standard deviation of the portfolio return is 22.07%, what is the 2.5% value at risk (note: the 95% confidence interval lower limit on the portfolio value is the value of the portfolio at this level of loss)? (use 2 decimals without $, so a loss of -$10.00 is -10.00) Answer:Question 2 - 21205.76 Feedback The correct answer is: -21908.92 expain