Ask Question, Ask an Expert


Ask Basic Finance Expert

The following are monthly percentage price changes for four market indexes.

Month DJIA S&P 500 Russell 2000 Nikkel
1 0.03 0.02 0.04 0.04
2 0.07 0.06 0.10 -0.02
3 -0.02 -0.01 -0.04 0.07
4 0.01 0.03 0.03 0.02
5 0.05 0.04 0.11 0.02
6 -0.06 -0.04 -0.08 0.06

Compute the following.

A) Average monthly rate of return for each index
B) Standard deviation for each index
C) Covariance between the rates of return for the following indexes:
S&P 500-Russel 2000
S&P 500-Nikkei
Russell 2000-Nikkei
D) The correlation coefficients for the same four combinations
E) Using the answers from parts (a), (b), and (d), find out the expected return and standard deviation of a portfolio consisting of equal parts of (1) the S&P and the Russell 2000 and (2) the S&P and the Nikkei. Discuss the two portfolios.


Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M927660

Have any Question? 

Related Questions in Basic Finance

A raffle has a grand prize of a european cruise valued at

A raffle has a grand prize of a European cruise valued at $6500 with a second prize of a Las Vegas getaway valued at $700. If each ticket costs $3 and 8600 tickets are sold, what are the expected winnings far a ticket bu ...

What are derivatives define forward futures and option

What are derivatives? Define forward, futures, and option agreements. What are the underlying instruments in these agreements?

What is a real money balanceif the nominal money supply

What is a real money balance? If the nominal money supply increases 20 percent while prices increase 20 percent, what happens to the demand for real money balances? What happens to the supply of real money balances?

Wholesale hanks hardware had beginning retained earnings of

Wholesale Hank's Hardware had beginning retained earnings of $18,670. During the year, the company paid dividends of $2,050, and reported total sales of $203,846. Their tax rate is 35 percent. For the year, costs were $8 ...

Questionsalist and briefly describe the three general areas

Questions A. List and briefly describe the three general areas of responsibility for a chief financial officer (CFO) of a selected non-financial company which is listed on Australian Stock Exchange (ASX). Explain how tho ...

In 2005 when president bush announced ben bernankes

In 2005, when President Bush announced Ben Bernanke's appointment as Fed chair, the Dow Jones stock index jumped by more than 1 percent in a few minutes. a. Why do you think that happened? b. If the United States adopted ...

Cost of debt and equitythe manager of sensible essentials

Cost of Debt and Equity The manager of Sensible Essentials conducted an excellent seminar explaining debt and equity financing and how firms should analyze their cost of capital. Nevertheless, the guidelines failed to fu ...

Pierre imports has a capital budget of 20 millionit wants

Pierre Imports has a capital budget of $20 million.It wants to maintain a capital structure of 45 percent debt and 55 percent equity.This year it expects net income of $8 million. The company has 30 million authorized sh ...

Consider two risky stocks their variances are different

Consider two risky stocks (their variances are different from zero), which are perfectly negatively correlated, i.e., their correlation is equal to -1. Is it possible to combine these two stocks and form a zero-risk port ...

A suppose you are hiring a worker for your firm you

a. Suppose you are hiring a worker for your firm. You advertise a position for $50,000, but an applicant offers to work for $40,000. Should you jump at this offer? b. Suppose you have $1000 to lend and offer it for 10-pe ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate