(a)
To find: The standard deviations for the investments in stock 1 and stock 2. And, identify the stock that is the riskier investment using the standard deviation.
(b)
To find: The expected return and standard deviation for a person who is investing $500 in stock 1.
(c)
To find: The expected percent return and standard deviation for an individual who is constructing a portfolio by having 50% in both the stocks.
(d)
To find: The expected percent return and standard deviation for an individual who is constructing a portfolio by having 70% in stock 1 and 30% in stock 2.
(e)
To find: The value of the
Want to see the full answer?
Check out a sample textbook solutionChapter 5 Solutions
Essentials of Modern Business Statistics with Microsoft Office Excel (Book Only)
- The regression lines between two variables x and y are given by 2x + 3y – 6 = 0 and 5x + 7y – 12 = 0. Find the value of y (the correlation coefficient) and the mean values of x and y.arrow_forward(d) Find the variance of Y.arrow_forwardLet the two variables X and Y have the covariance and correlation coefficient between them as 2 and 0.5 respectively and V(X) = 2V(Y); then find the regression coefficient of X on Y.arrow_forward
- A finance analyzer have come to the conclusion that he wants to purchase stocks from Company A, with an expected yield of E(X) = 4% and variance to the yield being V(X) = 0.49. Another stock from another Company B have an expected yield of E(Y) = 6% and variance V(Y) = 0.64. The correlation of the yield between the two stocks is p(X,Y) = 0.3. The finance analyzer wants to invest a portion p(0 < p < 1) into Company A stocks, and the rest (1 - p) into company B stocks. The combined investment have a yield of W = pX + ( 1 - p)Y. For p = 0.4, such that W = 0.4X + 0.6Y. What is the expected value and variance for W.arrow_forwardIf y tends to increase linearly as x increases, the variables are _____ linearly correlated.arrow_forwardTwo variable are found to have a strong positive linear correlation. Pick the regression equation that best fits this scenario. y = 0.85x + 23 ŷ = 0.35x + 23 0.35x 23 | y = 0.85x – 23arrow_forward
- Customers at a gas station pay with a credit card (A), debit card (B), or cash (C). Assume that successive customers make independent choices with P(A) = 0.3, P(B) = 0.3, and P(C) = 0.4. (a) Among the next 210 customers, what are the mean and variance of the number who pay with a debit card? E(X) = V(X) = Explain your reasoning. This answer has not been graded yet. (b) Answer part (a) for the number among the 210 who don't pay with cash. E(X) = V(X) =arrow_forwardif Cov(x,y)-D2 and var(x)= 9 and var(y)=16 then the correlation coefficient between x and y isarrow_forwardINV2 P3c Suppose that the index model for two Canadian stocks HD and ML is estimated with the following results: RHD =0.02+0.80RM+eHD R-squared =0.6 RML =-0.03+1.50RM+eML R-squared =0.4 σM =0.20 where M is S&P/TSX Comp Index and RX is the excess return of stock X. What is the covariance and the correlation coefficient between HD and ML?arrow_forward
- The coefficient of correlation will be zero if if the relationship between two variables x and y is non-linear. if there is no linear relationship between two variables. if the covariance between two variables x and y is 1. None of the above.arrow_forwardA random variable X is normally distributed with a mean of 100 and a variance of 100, and a random variable Y is normally distributed with a mean of 200 and a variance of 400. The random variables have a correlation coefficient equal to 0.5. Find the mean and variance of the random variable:W = 5X + 4Yarrow_forwardYou test the effect of the gender and age on survival of patients receiving kidney. You use the proportional hazard model with the indicator variable Z1 = 1 for male patient and Z2 = 1 for adult patient. The resulting parameter estimates are b = 0.25, b2 = -0.45. The variance-covariance matrix for b1 and b, is 0.35 0.10 0.10 0.20 Which (approximately) of the following 95% for the hazard ratio of a male child patient compared to female adult patient?arrow_forward
- Calculus For The Life SciencesCalculusISBN:9780321964038Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.Publisher:Pearson Addison Wesley,Glencoe Algebra 1, Student Edition, 9780079039897...AlgebraISBN:9780079039897Author:CarterPublisher:McGraw Hill