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Homework answers / question archive / Jerry has a five-stock portfolio of with the following values and returns
Jerry has a five-stock portfolio of with the following values and returns. Market value Expected (1) Stocks return (%) IBM 8 $40,000 50,000 Apple 20 Microsoft 20,000 12 ATT 100,000 6 Cisco 30,000 10 $240,000 The value-weighted expected return of Jerry's portfolio is O a. 9.2596 b. 10.2596 O c. 11.7596 d. 12.259 e. None of the above. The table below provides the information about three stocks: (2) Stock (i) 1 Expected return Eri) 8% 12% 15% Standard deviation Oi 10% Correlation coefficient Pij P12 = P13 = 0.0 P23 = -0.2 2 15% 25% 3 The covariance of returns between Stocks 2 and 3 is O a. 0. b.-0.0025. O c. -0.0055. O d. -0.0075. e. None of the above. (3) The following is a firm's production function: Q = 12L2 – 0.5L3 where Q: level of output L: number of workers The maximum output occurs when the firm hires workers. a. 0. b. 8. O c. 16. d. 24. e. None of the above.
1. We will be calculating the weight of stock seperately-
IBM= (40,000/240000)= 16.67%
Apple=( 50,000/240000)= 20.83%
Microsoft=(20,000/240000)=8.333%
ATT= (1,00,000/240000)=41.67%
Cisco=(30,000/240000)= 12.5%
Value weighted return will be related to weighted average Return=(8*16.67%)+(20*20.83%)+(12*8.33%)+(6*41.67%)+(10*12.5%)
=(1.33+4.166+.99999+2.50+1.25)
=10.25%
Correct answer is option ( B) 10.25%
