Question
In: Finance
You are considering investing in three different assets. The first is a stock, the second is a long-term government bond and the third is a T-bill money market fund that yields a sure rate of 5%.
You are considering investing in three different assets. The first is a stock, the second is a long-term government bond and the third is a T-bill money market fund that yields a sure rate of 5%. The probability distributions of both the risky assets: Expected Return Standard Deviation Stock (S) er=15% sd=32% Bond (B) er=9% st=23 The correlation between the stock and bond returns is 0.10. A. Compute the expected return and standard deviation of the optimal risky portfolio (aka optimal tangency portfolio).
Solutions
jeff jeffy answered 2 years agoRelated Solutions
A pension fund manager is considering three assets. The first is a stock fund, the second...
A pension fund manager is considering three assets. The first is
a stock fund, the second is a long-term government and corporate
bond fund, and the third is a T-bill yielding 0.07. The probability
distribution of the risky funds is as follows:
Expected ret.
std. dev.
Stock fund
0.18
0.29
Bond fund
0.11
0.11
The correlation between the fund returns is 0.5. What is the
weight of stock fund in the optimal risky
portfolio?
Round your answer to 4 decimal...
A pension fund manager is considering three assets. The first is a stock fund, the second...
A pension fund manager is considering three assets. The first is
a stock fund, the second is a long-term government and corporate
bond fund, and the third is a T-bill yielding 0.06. The probability
distribution of the risky funds is as follows:
Expected ret.
std. dev.
Stock fund
0.18
0.3
Bond fund
0.12
0.14
The correlation between the fund returns is 0.2.
What is the expected return of the
optimal risky portfolio?
Round your answer to 4 decimal places. For...
A pension fund manager is considering three assets. The first is a stock fund, the second...
A pension fund manager is considering three assets. The first is
a stock fund, the second is a long-term government and corporate
bond fund, and the third is a T-bill yielding 0.05. The probability
distribution of the risky funds is as follows:
Expected ret.
std. dev.
Stock fund
0.20
0.29
Bond fund
0.11
0.15
The correlation between the fund returns is 0.4. What is the
expected return of the optimal risky
portfolio?
A pension fund manager is considering three assets. The first is a stock fund, the second...
A pension fund manager is considering three assets. The first is
a stock fund, the second is a long-term government and corporate
bond fund, and the third is a T-bill yielding 8%. The probability
distribution of the risky funds is as follows:
E[r]
std. dev.
Stock fund
20%
30%
Bond fund
12%
15%
The correlation between the fund returns is 0.10. What is the
investment proportion in the minimum variance
portfolio of stock fund?
With the same set of assets...
A pension fund manager is considering three assets. The first is a stock fund, the second...
A pension fund manager is considering three assets. The first is
a stock fund, the second is a long-term government and corporate
bond fund, and the third is a T-bill yielding 8%. The probability
distribution of the risky funds is as follows:
E[r]
std. dev.
Stock fund
20%
30%
Bond fund
12%
15%
The correlation between the fund returns is 0.10.
A) What is the investment proportion in the minimum
variance portfolio of stock fund?
B) Solve numerically for the...
A pension fund manager is considering three assets. The first is a stock fund, the second...
A pension fund manager is considering three assets. The first is
a stock fund, the second is a long-term government and corporate
bond fund, and the third is a T-bill yielding 8%. The probability
distribution of the risky funds is as follows:
E[r]
std. dev.
Stock fund
20%
30%
Bond fund
12%
15%
The correlation between the fund returns is 0.10. What is the
investment proportion in the minimum variance
portfolio of stock fund? With the same set of assets...
1. A pension fund manager is considering three assets. The first is a stock fund, the...
1.
A pension fund manager is considering three assets. The first is
a stock fund, the second is a long-term government and corporate
bond fund, and the third is a T-bill yielding 0.05. The probability
distribution of the risky funds is as follows:
Expected ret.
std. dev.
Stock fund
0.19
0.25
Bond fund
0.09
0.13
The correlation between the fund returns is 0.17. An investor
has a risk-aversion of 8. In her optimal complete
portfolio (including stocks, bonds, and risk-free...
pension fund manager is considering three mutual funds. The first is a stock fund, the second...
pension fund manager is considering three mutual funds. The
first is a stock fund, the second is a long-term government and
corporate bond fund, and the third is a T-bill money market fund
that yields a sure rate of 4.7%. The probability distributions of
the risky funds are: Expected Return Standard Deviation Stock fund
(S) 17 % 37 % Bond fund (B) 8 % 31 % The correlation between the
fund returns is .1065. Suppose now that your portfolio must...
You are considering investing $1000 in a T-bill that returns 5% and a risky portfolio, P,...
You are considering investing $1000 in a T-bill that returns 5%
and a risky portfolio, P, constructed with 2 risky securities, X
and Y. The weights of X and Y are 0.60 and 0.40 respectively. X has
an expected rate of return of 0.14 and variance 0.01 and Y has an
ex- pected rate of return of 0.10 and a variance of 0.0081. You
want to form a portfolio with a standard deviation of return of
0.11, can you figure...
Sprockets, Inc. made an investment into three different long term assets. The first was purchased for...
Sprockets, Inc. made an investment into three different long
term assets. The first was purchased for 750,000 and will be
depreciated at a straight line for five years. The second was an
investment of $1,000,000 and will be depreciated using the 5-year
MACRS method. The third cost $1,500,000 and will be depreciated
utilizing 7-years MACRS. The company’s required rate of return is
10% and the tax rate is 21%.
What is the depreciation schedule for the first asset?
What is...
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