Question

In: Finance

Consider an investor who wishes to invest 40% allocation to defensive investments and 60% allocation to...

Consider an investor who wishes to invest 40% allocation to defensive investments and 60% allocation to growth investments. The investor has worked out the forecasted volatility, expected return and correlation between the two types of investments as below:

Investments Volatility Return
Defensive 6% per annum 5% per annum
Growth 18% per annum 11% per annum

The correlation between growth and defensive investments is 0.05

Calculate the return and volatility of the portfolio.

Group of answer choices

8.6% and 11.18%

8.6% and 11.06%

8% and 11.06%

None of the other answers

8% and 11.18%

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Consider an investor who wishes to invest 40% to defensive investments and 60% allocation to growth...
Consider an investor who wishes to invest 40% to defensive investments and 60% allocation to growth investments. The investor has worked out the forecasted volatility, expected return and correlation between the two types of investments as below: Investments Volatility Return Defensive 6% per annum 5% per annum Growth 18% per annum 11% per annum The correlation between growth and defensive investments is 0.05 Calculate the proportion of risk allocated to Defensive investments in this portfolio. Group of answer choices None...
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...
Suppose a U.S. investor wishes to invest in a British firm currently selling for £60 per...
Suppose a U.S. investor wishes to invest in a British firm currently selling for £60 per share. The investor has $6,000 to invest, and the current exchange rate is $2/£. Consider three possible prices per share at £54, £59, and £64 after 1 year. Also, consider three possible exchange rates at $1.6/£, $2/£, and $2.4/£ after 1 year. Calculate the standard deviation of both the pound- and dollar-denominated rates of return if each of the nine outcomes (three possible prices...
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per...
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $12,000 to invest, and the current exchange rate is $2/£. a. How many shares can the investor purchase? (Round your answer to the nearest whole number.) Number of shares b. Fill in the table below for dollar-denominated rates of return after one year in each of the nine scenarios (three possible share prices denominated in pounds times three possible exchange...
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per...
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $24,000 to invest, and the current exchange rate is $2/£. a. How many shares can the investor purchase? (Round your answer to the nearest whole number.) b. Fill in the table below for dollar-denominated rates of return after one year in each of the nine scenarios (three possible share prices denominated in pounds times three possible exchange rates). (Round your...
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per...
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $12,000 to invest, and the current exchange rate is $2/£. Suppose now the investor also sells forward £6,000 at a forward exchange rate of $1.90/£. Calculate the dollar-denominated returns for each scenario. (Round your answers to 2 decimal places. Negative amounts should be indicated by a minus sign.) Price per Share (£) Rate of Return (%) at Given Exchange Rate...
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per...
Suppose a U.S. investor wishes to invest in a British firm currently selling for £40 per share. The investor has $12,000 to invest, and the current exchange rate is $2/£. Consider three possible prices per share at £39, £44, and £49 after 1 year. Also, consider three possible exchange rates at $1.6/£, $2/£, and $2.4/£ after 1 year. Calculate the standard deviation of both the pound- and dollar-denominated rates of return if each of the nine outcomes (three possible prices...
Consider an investor with $10,000 available to invest. He has the following options regarding the allocation...
Consider an investor with $10,000 available to invest. He has the following options regarding the allocation of his available funds: (1) he can invest in a risk-free savings account with a guaranteed 3% annual rate of return; (2) he can invest in a fairly safe stock, where the possible annual rates of return are 6%, 8%, or 10%; or (3) he can invest in a more risky stock, where the possible annual rates of return are 1%, 9%, or 17%....
Your immediate boss is an Australian investor who wishes to invest approximately $1 million AUD in...
Your immediate boss is an Australian investor who wishes to invest approximately $1 million AUD in one of three provided online retail stores. As a business analyst, you need to do an in-depth analysis of Australian cultural dimensions (based on Hofstede’s) and identify and justify which one of these three companies would be the best fit for Australian market.
What should be the resource for asset allocation? Should it be 60/40 a reasonable allocation strategy?
What should be the resource for asset allocation? Should it be 60/40 a reasonable allocation strategy?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT