Which of the following(s) affects the composition of the optimal risky portfolio? I. Expected returns of...

Which of the following(s) affects the composition of the optimal risky portfolio?

I. Expected returns of assets

II. Standard deviations of assets

III. Risk-aversion

IV. Correlation among assets

V. Risk-free rate

	A.	I, II, III, and IV
	B.	I, II, and III
	C.	I, II, IV, and V
	D.	I, IV, and V
	E.	I, II, and IV

Expert Solution

jeff jeffy answered 2 years ago

Explain optimal risky portfolio

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

The following are the expected returns on a portfolio of investments. What is the expected rate of return on the portfolio?

The following are the expected returns on a portfolio of investments. What is the expected rate of return on the portfolio? Investment # of shares Price per share Expected returnA. 2000 $20 10%B. 3000 $10 15%C. 1000 $15 8%

Suppose your optimal risky portfolio has an expected return E(rp) = 6.5% and standard deviation as...

Suppose your optimal risky portfolio has an expected return E(rp) = 6.5% and standard deviation as 6%. You can also invest in a risk-free asset with rf = 3.5%. Your risk aversion A = 1/15. (a) Calculate the Sharpe ratio. (b) What is the expected return for your complete portfolio, if the standard deviation is 3%? (c) What is the optimal allocation that maximizes your utility? Write down the portion (in a number between 0 and 1, or greater than...

Consider the following information: • A risky portfolio contains two risky assets. • The expected return...

Consider the following information: • A risky portfolio contains two risky assets. • The expected return and standard deviation for the first risky asset is 18% and 25%, respectively. • The expected return and standard deviation for the second risky asset is 18% and 25%, respectively. • The correlation between the two risky assets is .55. • The expected on the 10-year Treasury bond is 3%. Find the optimal complete portfolio. Assume the investor’s level of risk aversion is 3....

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.

Consider the following information: A risky portfolio contains two risky assets. The expected return and standard...

Consider the following information: A risky portfolio contains two risky assets. The expected return and standard deviation for the first risky asset is 18% and 25%, respectively. The expected return and standard deviation for the second risky asset is 18% and 25%, respectively. The correlation between the two risky assets is .55. The expected on the 10-year Treasury bond is 3%. Find the minimum variance portfolio. Make sure to provide the weights, excepted return, and standard deviation of the portfolio...

You are a portfolio manager of a risky portfolio with an expected rate of return of...

You are a portfolio manager of a risky portfolio with an expected rate of return of 14% and a standard deviation of 28%. The T-bill rate is 4%. Suppose your client decides to invest in your risky portfolio a proportion (y) of his total investment budget so that his overall portfolio will have an expected return of 10%. a. What is the proportion y ? b. What will be the standard deviation of your client’s portfolio ? c. What is...

1. Portfolio theory defines risky investments in 2 ways expected returns and variance ( Standard deviation)...

1. Portfolio theory defines risky investments in 2 ways expected returns and variance ( Standard deviation) of expected returns. What assumptions need to be made about investors and the expected investment returns in this 2 factor approach and state if they are justified in real life. 2. What can be said about the portfolio that is represented by any point along the efficient frontier of risky investment portfolios? 3. What is meant by two fund separation? 4. The capital asset...

Question