Finance:Expected returns and portfolio calculations.

9. Calculating Returns and Variability You've observed the following returns on Mary Ann Data Corporation's stock over the past five years: 216 percent, 21 percent, 4 percent, 16 percent, and 19 percent.
a. What was the arithmetic average return on Mary Ann's stock over this five-year period?
b. What was the variance of Mary Ann's returns over this period? The standard deviation?
10. Calculating Real Returns and Risk Premiums In Problem 9, suppose the average inflation rate over this period was 4.2 percent and the average T-bill rate over the period was 5.1 percent.
a. What was the average real return on Mary Ann's stock?
b. What was the average nominal risk premium on Mary Ann's stock?
5. Calculating Expected Return Based on the following information, calculate the expected return:

6. Calculating Returns and Standard Deviations Based on the following information, calculate the expected return and standard deviation for the two stocks:

Discuss an overview of the measures of returns on various financial assets, and the various measures of the risk associated with the same assets. Develop the concept of portfolio and provide measures of portfolio risk and return. Analyze beta as a measure of relative risk of the stock and the impact of diversification on measuring risk.
Discuss the applications of portfolio theory, the concept of time value of money on financial management analysis.

5.13 in Ch. 5
Expected return
Year Stock L Stock M
2010 14% 20%
2011 14 18
2012 16 16
2013 17 14
2014 17 12
2015 19 10
P5รข?"13 Portfolio return and standard deviation Jamie Wong is considering building an investment portfolio containing two stocks, L and

1. Abigail Grace has a $900,000 fully diversified portfolio. She subsequently inherits ABC Company common stock worth $100,000. Her financial advisor provided her with the following estimates:
Expected Monthly Returns Standard Deviation of Monthly Returns
Original Portfolio 0.67% 2.37%
ABC Company 1

Security expected returnsand betas
Security E(R) Beta
1 10% 1.00
2 12% 1.20
3 13% 1.10
Suppose there are three well-diversified portfolios, as shown above. An arbitrage opportunity is implied in these numbers. Show mathematically how to take advantage of it.

Assuming that you are considering a portfolio containing tow assets, L and M. Asset L will represent 40% of the dollar value of the portfolio, and M will account for the 60%. The expected returns over the next 6 years, 2009-2014, for each of these assets are summarized in the following table.
Expected Return (%)
Year Asset L

You have estimated the following probability distributions of expected future returns for Stock X and Y:
Stock X Probability Return Stock Y Probability Return
0.1 -10% 0.2 2%
0.2 10% 0.2 7

You own a portfolio that is 38 percent invested in Stock X, 22 percent in Stock Y, and 40 percent in Stock Z. The expected returns on these three stocks are 10 percent, 15 percent, and 12 percent, respectively. What is the expected return on the portfolio? (Round your answer to 2 decimal places. (e.g., 32.16))
Portfolio expec

A stock has a beta of 1.25 and an expected return of 14%. A risk free asset currently earns 2.1%.
1) What is the expected return on a portfolio that is equally invested in two assets?
2) If a portfolio of the two assets has a beta of .93 what are the portfolio weights?
3) If a portfolio of the two assets has an expected ret

1. Why are bond market indices more difficult to construct and maintain than stock market indices?
2. An investor wishes to construct a portfolio consisting of a 70% allocation to a stock index and a 30% allocation to a risk free asset. The return on the risk-free asset is 4.5% and the expected return on the stock index is 1

1. What are the portfolio weights for a portfolio that has 145 shares of stock A that sells for $45 per share and 110 shares of Stock B that sells for $27 per share?
2. A portfolio has $2,950 invested in Stock A and $3,700 in Stock B. If the expected returns on these stocks are 8% and 11% respectively, what is the expected re