50.1K

Verified Solution

Link Copied!

Please, don't use AI, I've already tried, that's why I'm here. If possible use Excel formulas, cell references, & horizontal timelines to show all work.

The stock of Jones Trucking is expected to return 14 percent annually with a standard deviation of 8 percent. The stock of Bush Steel Mills is expected to return 14 percent annually with a standard deviation of 14 percent. The correlation between the returns from the two securities has been estimated to be +0.5. The beta of the Jones stock is 1.2, and the beta of the Bush stock is 1.5. The risk-free rate of return is expected to be 6 percent, and the expected return on the market portfolio is 12 percent. The current dividend for Jones is $6. The current dividend for Bush is $8.

What is the expected return from a portfolio containing the two securities if 60 percent of your wealth is invested in Jones and 40 percent is invested in Bush? Round your answer to one decimal place. %

What is the expected standard deviation of the portfolio of the two stocks? Round your answer to two decimal places. %

Which stock is the better buy in the current market? Round your answers to one decimal place. Required return (Jones): %

Required return (Bush): %

The -Select-Jonesstock is the better buy because the expected return is -Select- than the required return.

return is expected to be 6 percent, and the expected return on the market portfolio is 12 percent. The current dividend for Jones is $6. The current dividend for Bush is $8. % b. What is the expected standard deviation of the portfolio of the two stocks? Round your answer to two decimal places. % c. Which stock is the better buy in the current market? Round your answers to one decimal place. Required return (Jones): % Required return (Bush): % The stock is the better buy because the expected return is than the required return

Answer & Explanation Solved by verified expert

See Answer