Question

In: Finance

Given the following information calculate the standard deviationof returns of a portfolio that combines government...

Given the following information calculate the standard deviation of returns of a portfolio that combines government bonds with the market portfolio.

Rm = .11

Rf = .05

Standard Deviation of market return = 0.14

Enter your answer as a decimal accurate to three decimal places.

Proportion invested in Rm = 0.5

Solutions

Expert Solution

See here,

The risk of government bonds is zero because government will not defaults. So, standard deviation of bonds =0.

Portfolio standard deviation =SQRT((weight of market*standard deviation of market)^2+(weight of bonds*standard deviation of bond)^2)

Here they gave proportion invested in market=0.5

So proportion invested in bond =1-weight of market=1-0.5=0.5

Give risk of market=0.14

Standard deviation of portfolio =sqrt((0.5*0.14)^2+(0.5*0)^2)

Portfolio standard deviation =0.070 or 7%

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Given the following information, what is the standard deviation of the returns on a portfolio that...
Given the following information, what is the standard deviation of the returns on a portfolio that is invested 40 percent in stock A, 35 percent in stock B, and the remainder in stock C?   State of Economy Probability of State of Economy Stock A Stock B Stock C Normal 0.65 14.30% 16.70% 18.20% Recession 0.35 -9.80% 5.40% -26.90% A 12.72% B 14.07% C 1.41% D 7.41% E 11.86%
Given the following information, calculate the expected return and standard deviation for a portfolio that has...
Given the following information, calculate the expected return and standard deviation for a portfolio that has 50 percent invested in Stock A, 20 percent in Stock B, and the balance in Stock C. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Returns State of Economy Probability of State of Economy Stock A Stock B Stock C Boom .80 15 % 18 % 25 % Bust .20 16 0 −16 Expected return:__________% Standard...
Given the following information, calculate the expected return and standard deviation for a portfolio that has...
Given the following information, calculate the expected return and standard deviation for a portfolio that has 25 percent invested in Stock A, 32 percent in Stock B, and the balance in Stock C. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Returns State of Economy Probability of State of Economy Stock A Stock B Stock C Boom 0.30 10 % 19 % 20 % Bust 0.70 11 0 −11 Expected return %...
Use the following information on states of the economy and stock returns to calculate the standard...
Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) State of Economy Probability of State of Economy Security Return if State Occurs Recession .35 −10.00 % Normal .50 7.00 Boom .15 17.00
Use the following information to calculate the expected return and standard deviation of a portfolio that...
Use the following information to calculate the expected return and standard deviation of a portfolio that is 30 percent invested in 3 Doors, Inc., and 70 percent invested in Down Co. 3 Doors, Inc Down Co Expected Return, E(R) 18% 14% Standard deviation 48 50 Correlation .33
Use the following information to calculate the expected return and standard deviation of a portfolio that...
Use the following information to calculate the expected return and standard deviation of a portfolio that is 50 percent invested in 3 Doors, Inc., and 50 percent invested in Down Co.: (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) 3 Doors, Inc. Down Co. Expected return, E(R) 14 % 10 % Standard deviation, σ 42 31 Correlation 0.10
Problem 01: Calculate individual stock average, standard deviation, variance, portfolio variance Given are the daily returns...
Problem 01: Calculate individual stock average, standard deviation, variance, portfolio variance Given are the daily returns for two stocks X and Y for five business days in last week. If you have 1000 dollars to invest and you are considering to invest 600 dollars in stock X and 400 dollars in stock Y. Calculate the following A. average stock return for individual stocks B. variance and standard deviations for the individual stocks C. calculate the covariance and correlation between the...
Given the information in the following table, calculate the weight of the active portfolio (w*) if...
Given the information in the following table, calculate the weight of the active portfolio (w*) if you are trying to create an optimal portolio using the index model. Asset Expected return (%) Beta Residual std dev Stock A 0.18 1.9 0.22 Stock B 0.11 1.1 0.14 Stock C 0.09 0.7 0.115 T-bills 0.03 0 0 Index (market) 0.1 Market std deviation 0.2
Given the following information, calculate the beta for the portfolio of stocks A, B, and C....
Given the following information, calculate the beta for the portfolio of stocks A, B, and C. (Answer to the nearest tenth). Amount Stock Invested Beta Stock A $7,000 1.2 Stock B $1,000 1.3 Stock C $4,000 0.5
Using the following information, calculate the expected return and standard deviation of a portfolio with 50...
Using the following information, calculate the expected return and standard deviation of a portfolio with 50 percent in ABC and 50 percent in DEF. Then calculate the expected return and standard deviation of a portfolio where you invest 40 percent in ABC, 40 percent in DEF, and the rest in T-bills with a return of 3.5 percent. State of the Economy Probability ABC Stock Return (%) DEF Stock Return (%) Depression 0.1 -5 -7 Recession 0.2 -2 2 Normal 0.4...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT