Question
In: Finance
Consider the following four portfolios: Portfolio A has $950 invested in the risk free asset and...
Consider the following four portfolios:
-
Portfolio A has $950 invested in the risk free asset and $50 invested in the market.
-
Portfolio B has $5,000 invested in the risk free asset and $5,000 invested in the market portfolio.
-
Portfolio C has $25,000 invested in the risk free asset and $75,000 invested in the market portfolio.
-
Portfolio D has borrowed $500,000 at the risk free rate (e.g., W(risk free) = -50%) and has invested $1,500,000 in the market portfolio.
Assume that you can borrow and lend at a risk free rate of 5% per year and assume that the market portfolio has an expected return of 12% per year and its annual returns have a standard deviation of 22%. Select the most accurate statement below.
A) Of the four portfolios described above, Portfolio A has the highest reward to variability ratio.
B) Of the four portfolios described above, Portfolio B has the highest reward to variability ratio.
C) Of the four portfolios described above, Portfolio C has the highest reward to variability ratio.
D) Of the four portfolios described above, Portfolio D has the highest reward to variability ratio.
E) None of the above statements is correct.
Solutions
Expert Solution
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jeff jeffy answered 1 year agoRelated Solutions
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset:...
You are given the following information concerning three
portfolios, the market portfolio, and the risk-free asset:
Portfolio
RP
σP
βP
X
12.5
%
38
%
1.45
Y
11.5
33
1.15
Z
9.4
23
0.80
Market
11.9
28
1.00
Risk-free
6.2
0
0
What are the Sharpe ratio, Treynor ratio, and Jensen’s alpha for
each portfolio? (A negative value should be indicated by a
minus sign. Leave no cells blank - be certain to enter "0" wherever
required. Do not round...
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset:...
You are given the following information concerning three
portfolios, the market portfolio, and the risk-free asset:
Portfolio
Rp
σp
βp
X
12.5
%
38
%
1.45
Y
11.5
33
1.15
Z
9.4
23
.80
Market
11.9
28
1.00
Risk-free
6.2
0
0
What are the Sharpe ratio, Treynor ratio, and Jensen’s alpha for
each portfolio? (A negative value should be indicated by a
minus sign. Leave no cells blank - be certain to enter "0" wherever
required. Do not round...
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset:...
You are given the following information concerning three
portfolios, the market portfolio, and the risk-free asset:
Portfolio
RP
σP
βP
X
12.5
%
34
%
1.50
Y
11.5
29
1.20
Z
7.1
19
0.80
Market
10.5
24
1.00
Risk-free
6.2
0
0
What are the Sharpe ratio, Treynor ratio, and Jensen’s alpha for
each portfolio?
You own a portfolio equally invested in a risk-free asset and two stocks (If one of...
You own a portfolio equally invested in a risk-free asset and
two stocks (If one of the stocks has a beta of 1.54 and the total
portfolio is equally as risky as the market, what must the beta be
for the other stock in your portfolio? (Hint: Remember that the
market has a Beta=1; also remember that equally invested means that
each asset has the same weight- since there are 3 assets, each
asset's weight is 1/3 or 0.3333). Enter...
You own a portfolio equally invested in a risk-free asset and two stocks. If one of...
You own a portfolio equally invested in a risk-free asset and
two stocks. If one of the stocks has a beta of 1.20 and the beta of
the portfolio is 1.80, what is the beta of the other ? (2 points)
one ot the
Consider a portfolio with $2,943 invested in Asset A and $3,390 invested in Asset B with...
Consider a portfolio with $2,943 invested in Asset A and $3,390
invested in Asset B with the following returns and probabilities.
What is the rate of return on the portfolio pay when a TIE occurs?
(round the the nearest whole percentage ##%)
State
Probability
Asset A
Asset B
WIN
0.7
17%
36%
TIE
0.2
3%
7%
LOSS
0.1
-1%
-8%
Consider a portfolio with $3,697 invested in Asset A and $4,421 invested in Asset B with...
Consider a portfolio with $3,697 invested in Asset A and $4,421
invested in Asset B with the following returns and probabilities.
What is the rate of return on the portfolio pay when a LOSS occurs?
(round the the nearest whole percentage ##%, include a negative
sign if appropriate )
State
Probability Asset A Asset B
WIN 0.7 24% 39%
TIE 0.2 7% 6%
LOSS 0.1 -3% -9%
Consider a portfolio with $3,697 invested in Asset A and $4,421 invested in Asset B with...
Consider a portfolio with $3,697 invested in Asset A and $4,421
invested in Asset B with the following returns and probabilities.
What is the rate of return on the portfolio pay when a LOSS occurs?
(round the the nearest whole percentage ##%, include a negative
sign if appropriate )
State
Probability
Asset A
Asset B
WIN
0.7
24%
39%
TIE
0.2
7%
6%
LOSS
0.1
-3%
-9%
_______
In a portfolio consisting of the risk free asset and/or a risky asset, what is the...
In a portfolio consisting of the risk free asset and/or a risky
asset, what is the expected return and standard deviation if you
borrow 25% of your net worth by selling short the risk free asset
and invest the proceeds in the risky asset, given the following? Rm
= .15 Rf = .05 σm = .2
Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rP)...
Consider the following information about a risky portfolio that
you manage and a risk-free asset: E(rP) = 12%,
σP = 18%, rf = 3%.
a. Your client wants to invest a proportion of her
total investment budget in your risky fund to provide an expected
rate of return on her overall or complete portfolio equal to 6%.
What proportion should she invest in the risky portfolio,
P, and what proportion in the risk-free asset? (Do
not round intermediate calculations. Round...
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