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Prof. Hessel

hello, I have to turn this in by midnight est so any help is appreciated.

Prof. Hessel

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hello, I have to turn this in by midnight est so any help is appreciated.

Prof. Hessel Fin 3000

Topic 8 Risk and Return Fall 2016 Homework Answer Page to be submitted.

DUE Date announced in class

Your Name

Room Location: clock, no clock or center

Circle the location Roster number

Row number Your Roster number is on the attendance sheet next to your name and posted on

blackboard. Please color in your answer using a color highlighter.

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E 8-1 11/12/2016 Prof. Hessel A

5

10

-3 Fin 3000

Topic 8 Risk and Return

B

15

5

-5 Fall 2016 index

8

3

-2 1. How much is the expected profits of Stock A a)$3 b)$4 c)$5 d)$6

2. How much is the expected profits of the S&P Index a)$3 b)$4 c)$5 d)$6 3. How much is the standard deviation for Stock A? a)6.56 b)10 c)5 d)100 4. How much is the standard deviation for Stock B? a)6.56 b)10 c)5 d)100 5. How much is the covariance between stock A and the S&P Index? a) 7.33 b) 100

c)20 d) 50 6. How much is the covariance between stock B and the S&P Index? a) 7.33 b) 100

c)20 d) 50 7. How much is the lower limit of stock B ? a)-6.82 b)-11.5 c)-5.25 8. How much is the lower limit of the index? a)-6.82 b)-11.5 c)-5.25 9. How much is the correlation between stock A and the S&P Index? a) 25%

b) 61% c) 100% d) -47% 10. How much is the correlation between stock B and the S&P Index? ? a) 25%

b) 61% c) 100% d) -47% 11. How much is Stock A?s beta? a)0.80 b)1.00 c)1.30 d)2.00 12. How much is Stock B?s beta? a)0.80 b)1.00 c)1.30 d)2.00 13. Total risk of a stock is measured by the stock?s a)beta b)correlation c)standard

deviation d)return

14. The risk measure in the Security Market Line equation is a)beta b)correlation

c)standard deviation d)return

15. Standard deviation is an estimate of a)total risk b)unsystematic risk c)systematic risk

d)the difference between the systematic and unsystematic risk

16. Beta is an estimate of a)total risk b)unsystematic risk c)systematic risk d)the

difference between the systematic and unsystematic risk 8-2 11/12/2016 Prof. Hessel Fin 3000

Topic 8 Risk and Return Fall 2016 17.

If the returns of two stocks vary over time, the amount that they vary in common

is measured by their a)standard deviation b)covariance c)expected return d)betas

Use the information below to answer the next three questions

Security

Ford

GM

Index S&P 500

Ford with the S&P

GM with the S&P

Ford with GM Standard deviation

25

35

30

Covariance

600

612.50

845 Variance

625

1,225

900 18. Use the information above to calculate the correlation between Ford and GM a) 58%

b ) 72% c) 80% d) 97%

19. Use the information above to calculate the correlation between Ford and index a)

58% b ) 72% c) 80% d) 97%

20. Use the information above to calculate the correlation between GM and index

a) 58% b ) 72% c) 80% d) 97% 8-3 11/12/2016

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