Question
In: Finance
An Investor is interested to construct a portfolio of two securities, X and Y. He is...
An Investor is interested to construct a portfolio of
two securities, X and Y. He is given the following information: The
expected return for X and Y are 11.75% and 20.25% respectively and
standard deviation of return (σ) of X is 9.95% and 18.12%
respectively and correlation of coefficient (ρ) between X &
Y is 0.159. If the investor is constructing five portfolios as
follows: all funds are invested in X, 50% each in X and Y, 80%
& 20% in X and Y, 30% & 70% in X and Y and All in
Y, compute expected return and risk from all portfolios and which
portfolio is best performing from return and risk point of
view.
Solutions
Expert Solution
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jeff jeffy answered 1 year agoRelated Solutions
Suppose John wishes to construct his portfolio with Stock X and Y, but he is not...
Suppose John wishes to construct his portfolio with
Stock X and Y, but he is not decided on the
weights. Jane wishes to construct her portfolio with Stock
Y and Z, also undecided on the weights.
Stock X
Stock Y
Stock Z
Expected Return
0.06
0.18
0.12
Standard Deviation
0.10
0.30
0.20
Covariance between X and Y
-0.027
Covariance between Y and Z
0.054
Compute the correlation coefficients for John's and Jane's
portfolios.
Which person has a greater chance to...
Suppose John wishes to construct his portfolio with Stock X and Y, but he is not...
Suppose John wishes to construct his portfolio with
Stock X and Y, but he is not decided on the
weights. Jane wishes to construct her portfolio with Stock
Y and Z, also undecided on the weights.
Stock X
Stock Y
Stock Z
Expected Return
0.06
0.18
0.12
Standard Deviation
0.10
0.30
0.20
Covariance between X and Y
-0.027
Covariance between Y and Z
0.054
(4 points) Compute the correlation coefficients for John's and
Jane's portfolios.
(3 points) Which person has...
Suppose John wishes to construct his portfolio with Stock X and Y, but he is not...
Suppose John wishes to
construct his portfolio with Stock X and Y, but he
is not decided on the weights. Jane wishes to construct her
portfolio with Stock Y and Z, also undecided on
the weights.
Stock
X
Stock
Y
Stock
Z
Expected
Return
0.06
0.18
0.12
Standard
Deviation
0.10
0.30
0.20
Covariance
between X and Y
-0.027
Covariance
between Y and Z
0.054
(4 points) Compute the correlation coefficients for John's and
Jane's portfolios.
(3 points) Which person has...
1. An investor is evaluating a two-asset portfolio of the following securities: Stock Expected Return Expected...
1. An investor is evaluating a two-asset portfolio of the
following securities: Stock Expected Return Expected Risk (?)
Correlation (?) Google (U.S.) 18.60% 22.80% .60 Vodafone (U.K.)
16.00% 24.00%
a. If the two securities have a correlation of .60 what is the
expected risk and return for a portfolio that is equally
weighted?
b. If the two securities have a correlation of .60 what is the
expected risk and return for a portfolio that is 70% Google and 30%
Vodafone?...
You are considering investing $2,500 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% and a risky portfolio, P, constructed with two risky securities, X and Y
You are considering investing $2,500 in a complete portfolio.
The complete portfolio is composed of Treasury bills that pay 5%
and a risky portfolio, P, constructed with two risky
securities, X and Y. The optimal weights of X and Y in Pare 75% and 25% respectively. X has an expected rate of return of
18%, and Y has an expected rate of return of 14%. To form a
complete portfolio with an expected rate of return of 8%, you
should...
You are considering investing $10,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 3.75% and a risky portfolio, P, constructed with two risky securities, X and Y.
You are considering investing $10,000 in a complete
portfolio. The complete portfolio is composed of Treasury bills
that pay 3.75% and a risky portfolio, P, constructed with two risky
securities, X and Y. The optimal weights of X and Y in P are 32.7%
and 67.3%, respectively. X has an expected rate of return of 8.5%,
and Y has an expected rate of return of 13.8%. The dollar values of
your positions in X, Y, and Treasury bills would be...
6.There are two assets in one portfolio, X and Y. The weight for Asset X is...
6.There are two assets in one portfolio, X and Y. The weight for
Asset X is 48%.
Asset X has a 50-50 chance of earning a return of 10% or
20%.
Asset Y's expected return is 23% and the standard deviation is
33%.
Assume the correlation coefficient between X and Y is 0.53.
Calcualte the expected return of the portfolio.
Calculate the standard deviation of the portfolio return.
A person is interested in constructing a portfolio. Two stocks are being considered. Let x =...
A person is interested in constructing a portfolio. Two
stocks are being considered. Let x = percent
return for an investment in stock 1, and y =
percent return for an investment in stock 2. The expected return
and variance for stock 1 are
E(x) = 8.55%
and Var(x) = 25. The
expected return and variance for stock 2 are
E(y) = 3.40% and
Var(y) = 1. The covariance
between the returns is σxy =
−3.
(a)
What is the standard...
You are considering investing in two securities, X and Y. The following data are available for...
You are considering investing in two securities, X and Y. The
following data are available for the two securities: Security X
Security Y Expected return 0.09 0.02 Standard deviation of returns
0.04 0.06 Beta 1.00 0.85 Round your answers to two decimal places.
If you invest 40 percent of your funds in Security X and 60 percent
in Security Y and if the correlation of returns between X and Y is
+0.45, compute the following: The expected return from the...
You are considering investing in two securities, X and Y. The following data are available for...
You are considering investing in two securities, X and Y. The
following data are available for the two securities:
Security X
Security Y
Expected return
0.18
0.07
Standard deviation of returns
0.04
0.06
Beta
1.60
0.55
Round your answers to two decimal places.
If you invest 40 percent of your funds in Security X and 60
percent in Security Y and if the correlation of returns between X
and Y is +0.55, compute the following:
The expected return from the...
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