Consider the following information:
A risky portfolio contains two risky assets.
The expected return and standard...
Consider the following information:
A risky portfolio contains two risky assets.
The expected return and standard deviation for the first risky
asset is 18% and 25%, respectively.
The expected return and standard deviation for the second risky
asset is 18% and 25%, respectively.
The correlation between the two risky assets is .55.
The expected on the 10-year Treasury bond is 3%.
Find the minimum variance portfolio. Make sure to provide the
weights, excepted return, and standard deviation of the portfolio
returns.
Find the optimal risky portfolio. Make sure to provide the
weights, excepted return, and standard deviation of the portfolio
returns.
Find the optimal complete portfolio. Assume the investor’s
level of risk aversion is 3. Make sure to provide the weights,
excepted return, and standard deviation of the portfolio
returns.
Consider the following information:
• A risky portfolio contains two risky assets.
• The expected return and standard deviation for the first
risky asset is 18% and 25%, respectively.
• The expected return and standard deviation for the second
risky asset is 18% and 25%, respectively.
• The correlation between the two risky assets is .55.
• The expected on the 10-year Treasury bond is 3%.
Find the optimal complete portfolio. Assume the investor’s
level of risk aversion is 3....
Consider a set of risky assets that has the following expected
return and standard deviation:
Asset
Expected Return
E(r)
Standard Deviation
1
0.12
0.3
2
0.15
0.5
3
0.21
0.16
4
0.24
0.21
If your utility function is as described in the book/lecture
with a coefficient of risk aversion of 4.0 , then what
is the second-lowest utility you can obtain from an investment in
one (and only one) of these assets? Please calculate utility using
returns expressed in decimal form...
3. Consider the following portfolio of two risky assets: the
asset 1 with return r1 and the asset 2 with return r2. We invest x
dollars in the asset 1 and (1-x) dollars in the asset 2, where
0<=x<=1.
a. Calculate the expected value of the portfolio E[rp]
b. Calculate the variance of the portfolio, Var(rp)
c. Based on your findings on the part b. what kind of assets you
should choose when constructing the portfolio.
d. CAPM assets that...
Suppose a fund has a portfolio with two risky assets; stock and
bond. Annual expected return of stock is 0.15 and standard
deviation of 0.10 and expected return of bond is 0.08 and standard
deviation of 0.07. The correlation-coefficient between stock and
bond is 0.2. while t-bill has annual return of 0.03
Draw the opportunity set with 25% increment in bond fund. Also
indicate the variance minimizing weight for bond and stock
Draw the optimal CAL line and calculate the...
You manage a risky portfolio with an expected rate of
return of 17% and a standard deviation of 35%. The T-bill rate is
5%.
What is the Sharpe ratio of the risky portfolio?
Your client chooses to invest 70% of a portfolio in your fund
and 30% in an essentially risk-free money market fund. What is the
expected return and standard deviation of the rate of return on
their portfolio?
Another client wishes to invest such that the resulting
combination...
You manage a risky portfolio with an expected rate of return of
17% and a standard deviation of 28%. The T-bill rate is 7%. Your
client’s degree of risk aversion is A = 2.0, assuming a utility
function U = E(r) − ½Aσ².
a. What proportion, y, of the total investment should be
invested in your fund? (Do not round intermediate calculations.
Round your answer to 2 decimal places.)
b. What are the expected value and standard deviation of the...
You manage a risky portfolio with an expected rate of return of
17% and a standard deviation of 27%. The t-bill rate is 7%.
a) One of your clients chooses to invest 70% of a portfolio in
your risky fund and 30% in t-bills. What is the expected return and
standard deviation of your client’s portfolio?
b) What is the Sharpe Ratio of the risky portfolio you offer?
What is the Sharpe Ratio of your client’s portfolio?
c) If another...
You manage a risky portfolio with an expected rate of return of
20% and a standard deviation of 36%. The T-bill rate is 5%. Your
client’s degree of risk aversion is A = 1.6, assuming a
utility function U = E(r) -
½Aσ².
a. What proportion, y, of the total
investment should be invested in your fund? (Do not round
intermediate calculations. Round your answer to 2 decimal
places.)
b. What is the expected value and standard
deviation of the...
you manage a risky portfolio with an expected rate of return of
18% and a standard deviation of 36%. The T- Bill rate is 6%
your risky portfolio includes the following investments in the
given proportions:
stock a 27%
stock b 35%
stock c 38%
suppose that your client decided 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 15%
A. what is...
Consider the following two assets: Asset A’s expected return is
15% and return standard deviation is 20%. Asset B’s expected return
is 10% and return standard deviation is 15%. The correlation
between assets A and B is 0.5.
(a) w1=0.75, w2=.50, find out expected returns and
SD/VARIANCE
(b) Instead of a correlation of 0.5 between assets A and B,
consider a correlation of - 0.5 and re-compute the above.