Question
In: Finance
Consider the following information: • A risky portfolio contains two risky assets. • The expected return...
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. Make sure to provide the weights,
excepted return, and standard deviation of the portfolio
returns.
Solutions
Expert Solution
Have solved it in excel and uploaded the picture in JPEG format:
jeff jeffy answered 1 year agoRelated Solutions
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...
3. Consider the following portfolio of two risky assets: the asset 1 with return r1 and...
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...
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...
I have the following information on 6 sets of two assets portfolios Expected Return portfolio ,...
I have the following information on 6 sets of two assets
portfolios
Expected Return portfolio , Covariance , Correlation, portfolio
variance, portfolio std dev. I have also calculated the risk
adjusted return for each portfolio
If I had to make a recommendation to an investor what would I be
looking for to minimize the portfolio risk ?
Consider a set of risky assets that has the following expected return and standard deviation: Asset...
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...
You are a portfolio manager of a risky portfolio with an expected rate of return of...
You are a portfolio manager of a risky portfolio with an
expected rate of return of 14% and a standard deviation of 28%. The
T-bill rate is 4%. Suppose your client decides to invest in your
risky portfolio a proportion (y) of his total investment budget so
that his overall portfolio will have an expected return of 10%.
a. What is the proportion y ?
b. What will be the standard deviation of your client’s portfolio
?
c. What is...
We have only two risky assets in the market with the following risk and return: Expected...
We have only two risky assets in the market with the following
risk and return:
Expected Return
Standard Deviation
Stocks
20%
25%
Bonds
15%
15%
The correlation between the two risky assets is: 0.5 and the
risk free in the market is 8%.
Find the weight of Stocks and Bonds in the optimal portfolio.
Calculate the return and standard deviation of the optimal
portfolio.
Calculate the standard deviation of portfolio (P) with
an expected return of 15% on the CAL....
We have only two risky assets in the market with the following risk and return: Expected...
We have only two risky assets in the market with the following
risk and return:
Expected Return
Standard Deviation
Stocks
20%
25%
Bonds
15%
15%
The correlation between the two risky assets is: 0.5 and the
risk free in the market is 8%.
Find the weight of Stocks and Bonds in the optimal portfolio.
Calculate the return and standard deviation of the optimal
portfolio.
Calculate the standard deviation of portfolio (P) with
an expected return of 15% on the CAL....
You are the manager of a portfolio of risky securities. Your portfolio has an expected return...
You are the manager of a portfolio of risky securities. Your
portfolio has an expected return (E(rP)) of 12% and a standard
deviation (P) of 18%. The risk free rate (rf) is 6%. The following
two clients want to invest some portions of their investment budget
in your portfolio and the balance in the risk free asset: Client 1
needs an expected return of 10% from her complete portfolio. Client
2 needs a complete portfolio with a standard deviation of...
You are managing a risky portfolio with an expected rate of return of 17% and a...
You are managing a risky portfolio with an expected rate of
return of 17% and a standard deviation of 27%. You think that this
risky portfolio is best one that you can construct to deliver the
best tradeoff between risk premium and return. The T-bill rate is
7%.
Suppose your risky portfolio includes the following investments
in the given proportions:
Stock A … 27%
Stock B … 33%
Stock C … 40%
1.) Eric just had a baby last year...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- I have a problem with my code. It does not run. Please can someone check the...
- As discussed in the text, in the absence of market imperfections and tax effects, we would...
- //This is an ArrayReverser Problem.. import java.util.Scanner; public class Main { public static void main(String[] args)...
- After completing its capital spending for the year, Carlson Manufacturing has $1,100 extra cash. Carlson’s managers...
- Question 2: How can we find the real root of a polynomial with one variable? Also...
- Apply the Cognitive/Affective/Behavior Attitude model to a day to day personal life experience at work, home...
- you may not use the Python ord() or chr() functions you may not use the Python...
ADVERTISEMENT