Question

In: Finance

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 is the expected return of the optimal risky portfolio?

What is the Sharpe ratio of the optimal risky portfolio?

Solutions

Expert Solution

EXPECTED RETURN AND STANDARD DEVIATION ROUNDED TO 2 DECIMALS. SHARPE RATIO WAS ROUNDED TO 4 DECIMALS. THANK YOU

EXPECTED RETURN : 8.5244% AND STANDARD DEVIATION :7.7868%, THEN ROUNDED TO 2 DECIMALS.

FOR SHARPE RATIO, BOTH ARE TAKEN TILL 4 DECIMALS. THANK YOU

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

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
You manage a risky portfolio with expected rate of return of 7% and standard deviation of 15%. The T-bill rate is 4%.
 You manage a risky portfolio with expected rate of return of 7% and standard deviation of 15%. The T-bill rate is 4%.  (1) Your client chooses to invest 50% of a portfolio in your fund and 50% in a T-hill money market fund. What is the expected value and standard deviation of the rate of return on his portfolio?   (2) Draw the CAL of your portfolio on an expected return-standard deviation diagram. What is the slope of the CAL? Show the position...
Weight of Security A Weight of Security B Portfolio Return Portfolio Standard Deviation 0% 100% 12...
Weight of Security A Weight of Security B Portfolio Return Portfolio Standard Deviation 0% 100% 12 225.0 20% 80% 10.4 121.0 40% 60% 8.8 49.0 60% 40% 7.2 9.0 80% 20% 5.6 1.0 100% 0% 4.0 25.0 How can you choose the right combination (i.e.,, the weights on A and B) to create a risk-free portfolio? Based on the result in part , could the equilibrium rf be greater than 6%? Explain.
You manage a risky portfolio with expected rate of return of 12% and a standard deviation...
You manage a risky portfolio with expected rate of return of 12% and a standard deviation of 24%.  The T-bill rate is 3%. Suppose that your client decides to invest in your portfolio a proportion, y, of the total investment budget so that the overall portfolio will have an expected rate of return of 8.40%.   What is the proportion y? What is the standard deviation of the rate of return on your client’s portfolio at this new level y?
The Treasury bill rate is 6%, and the expected return on the market portfolio is 12%....
The Treasury bill rate is 6%, and the expected return on the market portfolio is 12%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.7? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.9 offers an expected return of 8.7%, does it have a positive or...
The Treasury bill rate is 6%, and the expected return on the market portfolio is 12%
Problem 12-27 CAPM (LO2) The Treasury bill rate is 6%, and the expected return on the market portfolio is 12%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.7? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.9 offers an expected return of 8.7%, does it have...
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...
Consider a portfolio that offers an expected rate of return of 12% and a standard deviation...
Consider a portfolio that offers an expected rate of return of 12% and a standard deviation of 21%. T-bills offer a risk-free 6% rate of return. What is the maximum level of risk aversion for which the risky portfolio is still preferred to T-bills? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Asset A has an expected return of 15% and standard deviation of 20%. Asset B has an expected return of 20% and standard deviation of 15%.
      1. Asset A has an expected return of 15% and standard deviation of 20%. Asset B has an expected return of 20% and standard deviation of 15%. The riskfree rate is 5%. A risk-averse investor would prefer a portfolio using the risk-free asset and _______.            A) asset A            B) asset B            C) no risky asset            D) cannot tell from data provided2. The Sharpe-ratio is useful for            A) borrowing capital for investing            B) investing available capital            C) correctly...
Assume that tangent portfolio T has an expected return of 14%, with a standard deviation of...
Assume that tangent portfolio T has an expected return of 14%, with a standard deviation of 20%, and that the risk-free rate is 3%. You choose to invest a total of $1,000. $350 is invested in portfolio T and $650 in the risk-free asset. What are the expected return and standard deviation of your portfolio? Suppose you borrow $200 at the risk-free rate. Combining this with your original sum of $1,000, you invest a total of $1,200 in the risky...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT