Assume that you manage a risky portfolio with an expected rate of return of 15% and...

Assume that you manage a risky portfolio with an expected rate of return of 15% and a variance of 20%. The risk-free rate is 7%.

a) Draw capital allocation line considering the scenario: (i) y=0, (ii) y=1 and (iii)

y=1.50; where, y is proportions of your investment in risky assets.

b) Your client chooses to invest $15,000 in your fund and $5,000 in risk-free asset.

What is the reward-to-variability ratio of your client’s overall portfolio?

c) Suppose this client decides to invest in your risky portfolio a proportion (y) of her total

investment budget with the remainder in risk free asset so that her overall portfolio will have

an expected rate of return of 20%.

I. What is the investment proportion in risky portfolio (y)?

II. What is the Standard deviation on your client’s overall portfolio?

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Assume that you manage a risky portfolio with an expected rate of return of 15% and...

Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 29%. The T-bill rate is 5%. Your risky portfolio includes the following investments in the given proportions: Stock A 22 % Stock B 31 Stock C 47 Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have...

Assume that you manage a risky portfolio with an expected rate of return of 15% and...

Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 25%. The T-bill rate is 5%.a.(5 points) Your client chooses to invest $6,000 in your fund and $4,000 in a T-bill money market fund. What is the reward-to-variability ratio (S) of your client’s overall portfolio?b.Suppose this client decides to invest in your risky portfolio a proportion (y) of his total investment budget ($10,000) so that his overall portfolio will have...

Assume that you manage a risky portfolio with an expected rate of return of 15% and...

Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 25%. The T-bill rate is 3% . Suppose your risky portfolio includes the following investments in the given proportions. Dell 50% Apple 30% HP 20% What are the investment proportions of your client’s overall portfolio, including the position in T-bills, if your client's risk aversion coefficient is 3? Dell Apple HP T-Bill A. 32% B. 19.2% C. 12.8% D. 36%

Assume that you manage a risky portfolio with an expected rate of return of 15% and...

Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 47%. The T-bill rate is 5%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. a. What is the expected return and standard deviation of your client's portfolio? (Round your answers to 2 decimal places.) Expected return % per year Standard deviation % per year b. Suppose your risky...

Assume that you manage a risky portfolio with an expected rate of return of 12% and...

Assume that you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 44%. The T-bill rate is 5%. Your client chooses to invest 80% of a portfolio in your fund and 20% in a T-bill money market fund. What is the expected return of your client's portfolio? (Enter your answer as a decimal number rounded to four decimal places.) Expected return?

Assume that you manage a risky portfolio with an expected rate of return of 17% and...

Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. QUESTION 12 What is the Sharpe ratio of your risky portfolio? A. 27% B. 37% C. 19.32% D. 62.9% E. 17.58% 4 points QUESTION 13 What is the Sharpe ratio of your overall portfolio?...

Assume that you manage a risky portfolio with an expected rate of return of 17% and...

Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 35%. The T-bill rate is 4.5%. A client prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio subject to the constraint that the overall portfolio's standard deviation will not exceed 25%. What is the expected rate of return on your client's overall portfolio? Expected rate of return?

Assume you manage a risky portfolio with an expected rate of return of 8% and a...

Assume you manage a risky portfolio with an expected rate of return of 8% and a standard deviation of 18%. The T-bill rate is 3%. Suppose your client prefers to invest in your portfolio a proportion that maximizes the expected return of the overall portfolio subject to the constraint that the overall portfolio's standard deviation will note exceed 12%. What is the expected return of the overall portfolio? convert your answer to percentages and round to two decimal places

Assume you manage a risky portfolio with an expected rate of return of 12% and a...

Assume you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 21%. The T-bill rate is 3%. Your client decides to invest in your risky portfolio a proportion (y) of her total investment budget so that her overall portfolio will have an expected rate of return of 8%. What is the standard deviation of the rate of return on your client's portfolio? Convert your answer to percentages with two decimal points

Assume you manage a risky portfolio with an expected rate of return of 12% and a...

Assume you manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 21%. The T-bill rate is 3%. Your client decides to invest in your risky portfolio a proportion (y) of her total investment budget so that her overall portfolio will have an expected rate of return of 8%. What is the proportion of y? Convert your answer to percentages with two decimal points

Subjects