# A couple of Quant Questions....

The portfolio has the following characteristics: Market Value at beginning of Year 1: \$100,000 Capital Withdrawals: End of Year 1: \$4,000 End of Year 2: \$5,000 End of Year 1: \$6,000 Market Value end of Year 3: \$120,000 Based on the portfolio characteristics given above, the dollar-weighted rate of return is: (A) 1.57% (B) 1.67% © 10.92% (D) 12.00%

Scenario Probability Rate of Return Stock F Rate of Return Stock G 1 0.5 0.30 0.20 2 0.5 0.10 -0.10 Based on the data given above, the covariance between the rates of return on Stock F and Stock G is: (A) -0.0163 (B) +0.0500 © +0.0150 (D) +0.2000

An analyst developed the following data on Stock X and the market: Return on the market = 0.1200 Covariance between the return on Stock X and the return on the market = 0.0288 Correlation coefficient between the return on Stock X and the return on the market=0.8000 Standard dev of the returns on Stock X = 0.1800 Standard dev of the returns on the market = 0.2000 Based on the data above, the beta of Stock X is: (A) 0.144 (B) 0.720 © 0.800 (D) 0.899

Que 1: C? 10.92% Que 2: C? 0.015 Que 3: B? 0.72

oops, there was a typo in the first question… last capital withdrawal meant to say Year 3. delhirocks… you are good… 3/3. can you please show your working. thanks…

1st: You need to calculate IRR. Input foll CF yr0: (-) 100,000 1: 4,000 2: 5,000 3: 6000+120,000=126,000 Calculate IRR–> 10.92% 2nd Calculate expected return for each stock F=0.5*30%+0.50*10% = 20% G = 0.50*20%+0.50*-10% = 5% CV=[0.50(30%-20%)(20%-5%)]+[(0.50(10%-20%)(-10%-5%) = 0.015 3rd Beta = Covstock,market / variance market --> 0.0288/0.2^2 = 0.72