A portfolio that combines the risk-free asset and the market
portfolio has an expected return of 6 percent and a standard
deviation of 9 percent. The risk-free rate is 3 percent, and the
expected return on the market portfolio is 11 percent. Assume the
capital asset pricing model holds.
What expected rate of return would a security earn if it had a
.35 correlation with the market portfolio and a standard deviation
of 54 percent?
A portfolio that combines the risk-free asset and the market
portfolio has an expected return of 6.7 percent and a standard
deviation of 9.7 percent. The risk-free rate is 3.7 percent, and
the expected return on the market portfolio is 11.7 percent. Assume
the capital asset pricing model holds.
What expected rate of return would a security earn if it had a .42
correlation with the market portfolio and a standard deviation of
54.7 percent? (Do not round intermediate calculations....
Choose the correct statements within Portfolio risk
concept:
1) Total
portfolio risk (σ) is equal to
nonsystematic risk plus non-diversifiable risk.
2) Total
portfolio risk (σ) is equal to
systematic risk minus nonsystematic risk.
3) Adding assets
to a portfolio can reduce its systematic risk.
4) Each new
asset added to a portfolio will reduce its diversifiable risk, but
after a certain amount of assets in portfolio this effect will be
close to 0.
5) Market risk
can be reduced to 0 by adding assets...
Investing includes risk, return, portfolio construction, asset
allocation, and the evaluation of the portfolio.
Discuss return as it is related to risk. What
is return, component parts of return, historical returns, and the
relationship of returns, and considerations in evaluating
return?
Your client would like to invest $15,000 in both the risk-free
asset with return of rf = 1% and the risky portfolio with expected
return of μm = 8% and standard deviation of σm = 25%. Her utility
function is U(μ,σ)=μ−ασ2, where her risk aversion is 1.5.
a.How much should you invest in the risky portfolio so that she
can receive the greatest utility?
b. What is the expected return of this optimal portfolio?
c. What is the standard deviation...
You
are a manager of a risky portfolio (consists of bonds and stocks)
with an expected return E(rp) = 8% and standard deviation stdevp =
12%. The risk free rate rf = 2% and the standard deviation of the
risk free asset is stdevf = 0% 7. Your client chooses to invest 40%
in your portfolio (p) and 60% (f) in the risk-free asset. What is
the expected return?1. Your client chooses to invest 40% in your portfolio (p) and...
The risk-free asset has a return of 1.62%. The risky asset has a
return of 8.82% and has a variance of 8.82%. Karen has the
following utility function: LaTeX:
U=a\times\sqrt{r_{c\:}}-b\times\sigma_cU = a × r c − b × σ c, with
a=1.3 and b=8.78. LaTeX: r_cr c and LaTeX: \sigma_cσ c denote the
return and the risk of the combined portfolio. The optimal amount
to be invested in the risky portfolio is 33.85% . (Note: this
solution does not necessarily...
1. Frane Ltd has available two investment opportunities with the
following risk return
characteristics
A
B
Expected return
13%
20%
Risk
4%
8%
Frane Ltd plans to invest 65% of its available funds in Security
A, and 35% in B.
The directors believe that the correlation coefficient between the
returns of the
securities is +0.2.
(i) Calculate the expected return of the portfolio and the risk
of the portfolio.
E(RP)=15.45%
σp= 4.18%
This one I have calculated, thank you.
(ii)...
1. Frane Ltd has available two investment opportunities with the
following risk return
characteristics
A
B
Expected return
13%
20%
Risk
4%
8%
Frane Ltd plans to invest 65% of its available funds in Security
A, and 35% in B.
The directors believe that the correlation coefficient between the
returns of the
securities is +0.2.
(i) Calculate the expected return of the portfolio and the risk
of the portfolio.
E(RP)=15.45%
σp= 4.18%
This one I have calculated, thank you.
(ii)...
3. Consider the following portfolio of two risky assets: the
asset 1 with return r1 and the asset 2 with return r2. We invest x
dollars in the asset 1 and (1-x) dollars in the asset 2, where
0<=x<=1.
a. Calculate the expected value of the portfolio E[rp]
b. Calculate the variance of the portfolio, Var(rp)
c. Based on your findings on the part b. what kind of assets you
should choose when constructing the portfolio.
d. CAPM assets that...