Question
In: Finance
6. Answer the following questions. 1) The standard deviation of market portfolio is 20%. The average...
6.
Answer the following questions.
1) The standard deviation of market portfolio is 20%. The
average risk aversion
coefficient is 3. Risk free interest rate is 3%. Calculate the
expected return of market portfolio at equilibrium.
3) Following 1) and 2), according to CAPM, calculate the
expected returns of two stocks with betas equal to 0.6 and 1.2
respectively.
2) Following 1), There is an investor with mean-variance
utility function ? = ?(? ) −
FINA305
?
2 ??? . Calculate the optimal weight to be invested in the
market portfolio for the
1
investor with ? = 4.
2
Page 3 of 4
Solutions
jeff jeffy answered 1 year agoRelated Solutions
The expected return of market portfolio is 10%. The standard deviation of market portfolio is 20%....
The expected return of market portfolio is 10%. The standard
deviation of market portfolio is 20%. Risk free interest rate is
2%. There is an investor with mean-variance utility
function Answer the following questions.
1) Calculate the optimal weight to be invested in the market
portfolio for the investor with A=5 . Calculate the expected return
and standard deviation of the optimal complete portfolio for the
investor.
2) According to the CAPM, calculate the expected returns of two
stocks (stock 1...
The standard deviation of the market-index portfolio is 20%. Stock A has a beta of 2.00,...
The standard deviation of the market-index portfolio is 20%.
Stock A has a beta of 2.00, and a residual standard deviation of
30%.
a.Calculate the total variance for increase of 0.10 in its
beta.
b.Calculate the total variance for an increase of 2.62% in its
residual standard deviation.
(Do not round intermediate calculations. Round your answers to
the nearest whole number.)
The average monthly return of a bond portfolio is 1% with a standard deviation of 4%....
The average monthly return of a bond portfolio is 1% with a
standard deviation of 4%. On the other hand the average monthly
return of a stock portfolio is 2% with standard deviation of 6%.
Each portfolio is measured on a period of 24 months. Test if the
variance of the stock portfolio is higher at 5% significance
level.
Portfolio Average Return Standard Deviation Beta A &nb
Portfolio
Average Return Standard
Deviation Beta
A
14.7%
18.6%
1.47
B
8.8
14.2
.78
C
11.2
16.0
1.22
The risk-free rate is 4.5 percent and the market risk
premium is 7 percent.
What is the Treynor ratio of a
portfolio comprised of 30 percent portfolio A, 20 percent portfolio
B, and 50 percent portfolio C?
SHOW WORK
The standard deviation of a portfolio: Multiple Choice is a weighted average of the standard deviations...
The standard deviation of a portfolio:
Multiple Choice
is a weighted average of the standard deviations of the
individual securities held in the portfolio.
is an arithmetic average of the standard deviations of the
individual securities which comprise the portfolio.
can never be less than the standard deviation of the most risky
security in the portfolio.
can be less than the standard deviation of the least risky
security in the portfolio.
must be equal to or greater than the lowest...
Expected Return Standard Deviation Portfolio A 12% 20% Portfolio B 6% 12% T-bill 3% 0% You...
Expected Return
Standard Deviation
Portfolio A
12%
20%
Portfolio B
6%
12%
T-bill
3%
0%
You are an investment adviser and you have the three investments
above to recommend to your clients. The correlation between A and B
is -0.5.
Solve for the optimal risky portfolio and enter the weights as a
%, 99% should be entered as 99.00%.
Percent invested in Portfolio A
Percent invested in Portfolio B
What is the standard deviation of the optimal risky
portfolio?
What...
Expected Return Standard Deviation Portfolio A 12% 20% Portfolio B 6% 12% T-bill 3% 0% You...
Expected Return
Standard Deviation
Portfolio A
12%
20%
Portfolio B
6%
12%
T-bill
3%
0%
You are an investment adviser and you have the three investments
above to recommend to your clients. The correlation between A and B
is -0.5.
Solve for the optimal risky portfolio and enter the weights as a
%, 99% should be entered as 99.00%.
Percent invested in Portfolio A
Percent invested in Portfolio B
The risk-free rate is 1% while the expected return and standard deviation of the market portfolio...
The risk-free rate is 1% while the expected return and standard
deviation of the market portfolio (S&P
500) are 9% and 19%, respectively.
(a) What is the standard deviation of
a combination of risk-free security and S&P 500 that has an
expected return of 12%? What is its
probability of loss? Assume that the S&P 500 returns have
a normal probability distribution.
(b) The optimal allocation to S&P
500 for an investor is 60%. What will be the optimal allocation...
Find the average return and standard deviation of an equal-weighted (1/3 in each) portfolio consisting of...
Find the average return and standard deviation of an
equal-weighted (1/3 in each) portfolio consisting of the three
stocks. Explain how a portfolio’s standard deviation can be lower
than any of the three stock’s standard deviations that make up that
portfolio. Year LAX return UWL return WIS return 2013 5% 2% 10%
2014 10% 4% 12% 2015 -3% 3% 8% 2016 12% -2% 9% 2017 1% 5% 15%
Expected return and standard deviation. Use the following information to answer the questions: a. What is...
Expected return and standard deviation. Use the following
information to answer the questions:
a. What is the expected return of each asset?
b. What is the variance and the standard deviation of each
asset?
c. What is the expected return of a portfolio with 8% in
asset J, 46% in asset K, and 46% in asset L?
d. What is the portfolio's variance and standard deviation
using the same asset weights from part (c)?
State of Economy
Probability of State...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Why is it okay to speculate on Currency?
- What is the budgeting cycle and master budget? Why should companies use a master budget?
- please i need to have good answers and easy to understand This exercise refers to the...
- (1 point) Find y as a function of t if y′′+25y=0, y(0)=4,y′(0)=6. y= ?
- What are the six steps of hypothesis testing? What does it mean if we reject the...
- Consider the following network of a project consisting of 7 activities with a scheduled project duration...
- In 1941, President Roosevelt spoke about the “four freedoms.” For many in the country, however, these...
ADVERTISEMENT