Question
In: Finance
Assume that you manage a risky portfolio with expected rate of return of 18% and standard...
- Assume that you manage a risky portfolio with expected rate of return of 18% and standard deviation of 28%. The T-bill rate is 8%.
a) Calculate the optimal allocation to risky portfolio and determine the utility score for this portfolio (assume A=3) [2]
Solutions
Expert Solution
a)
Optimal allocation formula = E[rp] - Rf /( A*standard deviation^2)
E[rp] = Expected return on portfolio
Rf = risk free rate
A =3
Optimal allocation to risky portfolio = (18% - 8%) / (3*28^2)
= 0.4252 or 42.52%
Utility Value:
Utility value = E(r) - (1/2)*A*(Standard Deviation^2)
= 18% - (1/2)*3*(0.28^2)
= 0.0624
jeff jeffy answered 2 years agoRelated Solutions
you manage a risky portfolio with an expected rate of return of 18% and a standard...
you manage a risky portfolio with an expected rate of return of
18% and a standard deviation of 36%. The T- Bill rate is 6%
your risky portfolio includes the following investments in the
given proportions:
stock a 27%
stock b 35%
stock c 38%
suppose that your client decided to invest in your portfolio a
proportion y of the total investment budget so that the overall
portfolio will have an expected rate of return of 15%
A. what is...
Assume that you manage a risky portfolio with an expected rate of return of 18% and...
Assume that you manage a risky portfolio with an expected rate
of return of 18% and a standard deviation of 34%. The T-bill rate
is 4%. Your client chooses to invest 85% of a portfolio in your
fund and 15% in a T-bill money market fund. a. What is the expected
return and standard deviation of your client's portfolio? (Round
your answers to 2 decimal places.) b. Suppose your risky portfolio
includes the following investments in the given proportions: Stock...
You manage a risky portfolio with an expected rate of return of 17% and a standard...
You manage a risky portfolio with an expected rate of
return of 17% and a standard deviation of 35%. The T-bill rate is
5%.
What is the Sharpe ratio of the risky portfolio?
Your client chooses to invest 70% of a portfolio in your fund
and 30% in an essentially risk-free money market fund. What is the
expected return and standard deviation of the rate of return on
their portfolio?
Another client wishes to invest such that the resulting
combination...
You manage a risky portfolio with an expected rate of return of 17% and a standard...
You manage a risky portfolio with an expected rate of return of
17% and a standard deviation of 28%. The T-bill rate is 7%. Your
client’s degree of risk aversion is A = 2.0, assuming a utility
function U = E(r) − ½Aσ².
a. What proportion, y, of the total investment should be
invested in your fund? (Do not round intermediate calculations.
Round your answer to 2 decimal places.)
b. What are the expected value and standard deviation of the...
You manage a risky portfolio with an expected rate of return of 17% and a standard...
You manage a risky portfolio with an expected rate of return of
17% and a standard deviation of 27%. The t-bill rate is 7%.
a) One of your clients chooses to invest 70% of a portfolio in
your risky fund and 30% in t-bills. What is the expected return and
standard deviation of your client’s portfolio?
b) What is the Sharpe Ratio of the risky portfolio you offer?
What is the Sharpe Ratio of your client’s portfolio?
c) If another...
You manage a risky portfolio with an expected rate of return of 20% and a standard...
You manage a risky portfolio with an expected rate of return of
20% and a standard deviation of 36%. The T-bill rate is 5%. Your
client’s degree of risk aversion is A = 1.6, assuming a
utility function U = E(r) -
½Aσ².
a. What proportion, y, of the total
investment should be invested in your fund? (Do not round
intermediate calculations. Round your answer to 2 decimal
places.)
b. What is the expected value and standard
deviation of the...
Assume that you manage a risky portfolio with an expected rate of return of 12% and...
Assume that you manage a risky portfolio with an expected rate
of return of 12% and a standard deviation of 44%. The T-bill rate
is 5%.
Your client chooses to invest 80% of a portfolio in your fund
and 20% in a T-bill money market fund.
What is the expected return of your client's portfolio?
(Enter your answer as a decimal number rounded to four
decimal places.)
Expected return?
Assume that you manage a risky portfolio with an expected rate of return of 17% and...
Assume that you manage a risky portfolio with an expected rate
of return of 17% and a standard deviation of 27%. The T-bill rate
is 7%. Your client chooses to invest 70% of a portfolio in your
fund and 30% in a T-bill money market fund.
QUESTION 12 What is the Sharpe ratio of your risky portfolio? A.
27% B. 37% C. 19.32% D. 62.9% E. 17.58% 4 points
QUESTION 13 What is the Sharpe ratio of your overall portfolio?...
Assume that you manage a risky portfolio with an expected rate of return of 17% and...
Assume that you manage a risky portfolio with an expected rate
of return of 17% and a standard deviation of 35%. The T-bill rate
is 4.5%.
A client prefers to invest in your portfolio a proportion
(y) that maximizes the expected return on the overall
portfolio subject to the constraint that the overall portfolio's
standard deviation will not exceed 25%.
What is the expected rate of return on your client's overall
portfolio?
Expected rate of return?
Assume you manage a risky portfolio with an expected rate of return of 8% and a...
Assume you manage a risky portfolio with an expected rate of
return of 8% and a standard deviation of 18%. The T-bill rate is
3%. Suppose your client prefers to invest in your portfolio a
proportion that maximizes the expected return of the overall
portfolio subject to the constraint that the overall portfolio's
standard deviation will note exceed 12%. What is the expected
return of the overall portfolio? convert your answer to percentages
and round to two decimal places
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Use the bond term's below to answer the question Maturity 7 years Coupon Rate 4% Face...
- What experience have you had with Organization Development or with Change Management? Describe the organization, the...
- 1. Renfro Rentals has issued bonds that have a 12% coupon rate, payable semiannually. The bonds...
- Given an array of positive integers a, your task is to calculate the sum of every...
- Define “culture.” Software is defined by the Merriam-Webster Dictionary as "the programs that run on a...
- In humans, hypotrichosis (sparse body hair) is a rare autosomal recessive condition. Let h = hypotrichosis...
- Increase all of the listing prices by 5% for all listings under $500,000 and 10% for...
ADVERTISEMENT