Problem 7-09, Diana Sauros Ace Mutual Fund
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
Given rates of return for a mutual fund manager and returns on the market… find the average and standard deviation of each.
Given rates of return for a mutual fund manager and returns on the market… find the average and standard deviation of each.
Given monthly returns for Digital Cheese and Executive Fruit… determine the variances and standard deviations for each stock as well as a portfolio that is 50-50 invested in the two stocks.
Given information on seven different stocks… determine the portfolio variances for each if you were to have half BP stock and half another stock – then they ask which portfolio would be the safest combination with BP.
Given the percent invested in one stock along with the standard deviation of both stocks… calculate the portfolio variance given different levels of correlation between the two stocks.
Determine the beta of each of the stocks given a table of stock returns and the market returns.
Given the standard deviation of the market… find the beta using the standard deviation or find the standard deviation given the beta for a well-diversified portfolio. For the last part, they ask you about the beta of a poorly diversified portfolio given its standard deviation.
Given the beta and standard deviation of return for two different companies along with the standard deviation of the market… determine the standard deviation of the portfolio given different weights of investment on each stock.
Given pairs of investments… choose the preferred portfolio for the rational investor based on risk and return characteristics.
Given the percent invested in stock along with the expected return and standard deviation for both stocks and ask you to find the standard deviation and expected return for the portfolio. Then they ask how it would change with different correlations and whether the investor is better off investing in the portfolio as opposed to just stock A.
Determine how Percival can improve upon his corporate bond portfolio by investing in an index fund, treasuries, and a combination of bonds and the index was given a correlation between the two.