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Answering the homework questions that are uploaded. 6 Questions that can be done on Excel and that are based on financial calculations and portfolio management. I need the answers in an excel workbook with the work shown on there. The 6th question is a short answer question about investment decisions.
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Explanation & Answer
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HOMEWORK 3
1
A)
Stock
A
B
T-Bills
Weight
Expected Return Beta
FS-STDEV
0,35
10%
0,95
35,00
0,35
17%
1,5
45,00
0,3
12%
0
0
B)
Expected Return
13,05%
Beta
0,8575
Non-Systematic Variance398,13
Residual STDEV
19,95
Total Variance
663,57
STDEV
25,76
Market Index RFR
Stock STDEV
19,00
12%
63175,00%
128250,00%
0
Market Standard deviation
Market Variance
A
B
29%
0,0841
R-square Beta
beta*Market
Variance
VarianceWeights Variance*w^2
0,29
1,05 0,088305
0,3045
0,6 0,10962
0,14
1,2 0,10092 0,720857
0,4 0,115337
Portfolio Risk
0,224957
Portfolio Standard
0,474296
deviation
B)
Alpha
A
B
Portfolio
Beta
3
-1,2
1,8
C)
Portfolio Variance
0,224957
Portfolio Beta 2,25
Beta Squared 5,0625
Market Variance
0,0841
Firm Specific -0,2008
Risk
D)
Portfolio Beta 2,25
Market Variance
0,0841
Cov (Portfolio,
0,189225
Market)
1,05
1,2
2,25
D
18,49
k
20,10%
Risk free rate
3%
Risk Premium 6,40%
Required Rate9,400%
of Return ®
Stock Price 91,99005
Expected Return
20,10%
Risk free
3%
Risk premium 6,40%
Initial correlation
267%
After doubling the correlation
NewCorrelation
5,34375
New Expected
37,200%
Retun
New Stock Price
49,7043
%change in stock
-45,97%
Price
market risk premium=
S&P 500
AAPL
AMZN
ISRG
TGT
WMT
XOM
Variance-covariance matrix
Market Variance
S&P 500
AAPL
AMZN
ISRG
TGT
WMT
XOM
5%
SD of Excess ReturnBeta
0,1701
0,2869
0,3554
0,3409
0,2761
0,2296
0,2163
0,02893401
S&P 500
$AAPL
0,0289
0,0347
0,0463
0,0434
0,0231
0,0174
0,0246
market risk premium=
$AMZN
$ISRG
$TGT
$WMT
0,0347
0,0417
0,0556
0,0521
0,0278
0,0208
0,0463
0,0556
0,0741
0,0694
0,0370
0,0278
0,0434
0,0521
0,0694
0,0651
0,0347
0,0260
0,0231
0,0278
0,0370
0,0347
0,0185
0,0139
0,0174
0,0208
0,0278
0,0260
0,0139
0,0104
0,0295
0,0394
0,0369
0,0197
0,0148
5%
Beta
S&P 500
1
1,2
1,6
1,5
0,8
0,6
0,85
SD of Systematic ComponentSD of Residual
0,1701
0
0,2041
0,2016
0,2721
0,2286
0,2551
0,2261
0,1361
0,2403
0,102
0,2057
0,1446
0,1609
Expected Return alpha
(%) %
1
5
0,00
$AAPL
1,2
6,5
0,50
$AMZN
1,6
9
1,00
$ISRG
1,5
9
1,50
$TGT
0,8
3,5
-0,50
$WMT
0,6
4
1,00
$XOM
0,85
initial weight
3
Weight
-1,25
Weight x Alpha
weight x Beta
(weight x SD of Residual)^2
weighted of expected excess return
$AAPL
12,30237465
0,447821169
22,3911%
0,537385403
0,008150613
0,537385403
$AM...