Question
In: Finance
The optimal risky portfolio constructed using the stock fund and the bond fund should be (wstock=40%,...
The optimal risky portfolio constructed using the stock fund and the bond fund should be (wstock=40%, wbonds=60%). The optimal risky portfolio’s expected return is 15%, and its standard deviation is 27%. The risk-free rate is 5%.
Jessica has a risk aversion level of 3. In her optimal complete portfolio, what is the proportion of the stock fund?
Round your answer to 4 decimal places. For example, if your answer is 3.205%, then please write down 0.0321.
Solutions
Expert Solution
proportion of optimal risky portfolio=(15%-5%)/(3*27%*27%)=0.4572
Proportion of stock fund=0.4572*40%=0.1829
jeff jeffy answered 2 years agoRelated Solutions
An investor chooses to invest 60% of a portfolio in a risky fund and 40% in...
An investor chooses to invest 60% of a portfolio in a risky fund
and 40% in a T-bill fund. The expected return of the risky
portfolio is 17% and the standard deviation is 27%. The T-bill rate
is 7%.
What is the expected return and the standard deviation of the
investor?
What is the Sharpe ratio of the risky portfolio and the
investor’s overall portfolio?
Suppose the investor decides to invest a proportion (y) of his
total budget in the...
Explain optimal risky portfolio
Explain optimal risky portfolio
Suppose a fund has a portfolio with two risky assets; stock and bond. Annual expected return...
Suppose a fund has a portfolio with two risky assets; stock and
bond. Annual expected return of stock is 0.15 and standard
deviation of 0.10 and expected return of bond is 0.08 and standard
deviation of 0.07. The correlation-coefficient between stock and
bond is 0.2. while t-bill has annual return of 0.03
Draw the opportunity set with 25% increment in bond fund. Also
indicate the variance minimizing weight for bond and stock
Draw the optimal CAL line and calculate the...
You must choose one of the following: a stock fund, a bond fund, or a portfolio...
You must choose one of the following: a stock fund, a bond fund,
or a portfolio of 50% stock and 50% bond. The expected returns are
13% and 8% for the stock and bond fund, respectively, and the
standard deviations are 20% and 16%, with a correlation of 0.40
between the two funds. You can also borrow or lend at 5%. Relying
on mean-variance analysis, determine the order of your preference
from most preferred to least preferred.
There are two tasks in portfolio choice problem: (i) determination of the optimal risky portfolio and...
There are two tasks in portfolio choice problem:
(i) determination of the optimal risky portfolio and (ii)
capital allocation.
These two tasks are independent, or one is separate from the
other. Explain why
5. Explain the Efficient Frontier of Risky Assets, Choosing the Optimal Risky Portfolio, and the Preferred...
5. Explain the Efficient Frontier of Risky Assets, Choosing the
Optimal Risky Portfolio, and the Preferred Complete Portfolio and a
Separation Property.
6. Explain the Single Index Model.
Explain the Efficient Frontier of Risky Assets, Choosing the Optimal Risky Portfolio, and the Preferred Complete...
Explain the Efficient Frontier of Risky Assets, Choosing the
Optimal Risky Portfolio, and the Preferred Complete Portfolio and a
Separation Property.
As a portfolio manager, you are considering three mutual funds: a stock fund, a bond fund,...
As a portfolio manager, you are considering three mutual funds:
a stock fund, a bond fund, and a money market bond that yields a
sure rate of
2.45 %.
Below is the information concerning the two risky funds: (Total 50
points)
Expected return
Standard deviation
Stock fund
0.22
0.56
Bond fund
0.06
0.25
The correlation between fund returns is
0.26 .
Find the weights of the minimum-variance
portfolio and calculate its expected return and its standard
deviation....
As a portfolio manager, you are considering three mutual funds: a stock fund, a bond fund,...
As a portfolio manager, you are considering three mutual funds:
a stock fund, a bond fund, and a money market bond that yields a
sure rate of
2.45 %.
Below is the information concerning the two risky funds: (Total 50
points)
Expected return
Standard deviation
Stock fund
0.22
0.56
Bond fund
0.06
0.25
The correlation between fund returns is
0.26 .
Find the weights of the minimum-variance
portfolio and calculate its expected return and its standard
deviation....
As a portfolio manager, you are considering three mutual funds: a stock fund, a bond fund,...
As a portfolio manager, you are considering three mutual funds:
a stock fund, a bond fund, and a money market bond that yields a
sure rate of
2.75 %. Below is the information
concerning the two risky funds: (Total 50 points)
Expected return
Standard deviation
Stock fund
0.28
0.43
Bond fund
0.06
0.11
The correlation between fund returns is
0.08 .
Find the weights of the minimum-variance
portfolio and calculate its expected return and its standard
deviation. Show...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- You’ve learned that it was important for African-Americans to attempt to retain their African musical traditions...
- You must evaluate a proposal to buy a new milling machine. The base price is $140,000,...
- “I’m not sure we should lay out $335,000 for that automated welding machine,” said Jim Alder,...
- Explain how genetics and environment influence the similarities and differences within twins. Be sure to give...
- Consider a specific job within the criminal justice system. What characteristics of that job are sources...
- Asiacentric Communication Ethics and Competence Asia is diverse and dynamic. It is a region of cultural...
- Three Steps to Cross-Cultural Dialogue With “a global mindset by which we try to see things...
ADVERTISEMENT