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In: Finance
The expected return of the S&P 500 = 11% and the risk = 22%. The risk...
The expected return of the S&P 500 = 11% and the risk = 22%. The risk free rate = 5%. Assume you have a very, very highly risk averse person whose A = 1,000. How much of the person’s wealth would be in stocks and how much in T-Bills?
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jeff jeffy answered 6 months agoRelated Solutions
Suppose that the S&P 500, with a beta of 1.0, has an expected return of 11%...
Suppose that the S&P 500, with a beta of 1.0, has an
expected return of 11% and T-bills provide a risk-free return of
6%.
a. What would be the expected return and beta
of portfolios constructed from these two assets with weights in the
S&P 500 of (i) 0; (ii) 0.25; (iii) 0.50; (iv) 0.75; (v) 1.0?
(Leave no cells blank - be certain to enter "0" wherever
required. Do not round intermediate calculations. Enter the value
of Expected return...
Suppose that the S&P 500, with a beta of 1.0, has an expected return of 12%...
Suppose that the S&P 500, with a beta of 1.0, has an expected return of 12% and T-bills provide a risk-free return of 3%.
a.
What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) .25; (iii) .50; (iv) .75; (v) 1.0? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal...
The one-month treasury rate is 0.9%, and the expected rate of return for the S&P 500...
The one-month treasury rate is 0.9%, and the expected rate of
return for the S&P 500 Index is 6.3%. Use the capital asset
pricing model (CAPM) to calculate the expected rate of return on a
security with a beta of 2.3.
security beta Standard deviation Expected return S&P 500 1.0 20% 10% Risk free security 0 0...
security
beta
Standard deviation
Expected return
S&P 500
1.0
20%
10%
Risk free security
0
0
4%
Stock d
( )
30%
13%
Stock e
0.8
15%
( )
Stock f
1.2
25%
( )
3) If stock F has an average return of 12%,
1. find the expected return based on CAPM equation and beta
1.2
2. find the abnormal returns, alpha
The S&P 500 index currently stands at 2,700 and has a volatility of 11%. The risk-free...
The S&P 500 index currently stands at 2,700 and has a
volatility of 11%. The risk-free interest rate is 2% and the
dividend yield on the index is 4%.
a.) Use Black-Scholes to value a three-month European put option
with a strike price of 2,500.
b.) Use Black-Scholes to value a one-year European call option
with a strike price of 3,000.
Risk and Return 1. Calculate monthly returns for Darden Restaurants and the S&P 500. Be sure...
Risk and
Return
1. Calculate monthly returns
for Darden Restaurants and the S&P 500. Be sure to include the
dividends for Darden in the return. Show All excel formulas.
Darden (DRI)
S&P 500
Month
Price
Dividend
Price
6/1/16
59.11
2098.86
DRI Return
SP Return
DRI- Ave
S&P - Ave
(DRI-Ave)x(S&P-Ave)
7/1/16
57.446472
0.56
2173.600098
8/1/16
58.043533
2170.949951
9/1/16
57.742203
2168.27002
10/1/16
61.009743
0.56
2126.149902
11/1/16
69.65522
2198.810059
12/1/16
69.10405
2238.830078
1/1/17
69.636215
0.56
2278.870117
2/1/17
71.520325
2363.639893
3/1/17
80.129959
2362.719971...
Risk and Return 1. Calculate monthly returns for Darden Restaurants and the S&P 500. Be sure...
Risk and
Return
1. Calculate monthly returns
for Darden Restaurants and the S&P 500. Be sure to include the
dividends for Darden in the return. Please show equations in
Excel.
Darden (DRI)
S&P 500
Month
Price
Dividend
Price
6/1/16
59.11
2098.86
DRI Return
SP Return
DRI- Ave
S&P - Ave
(DRI-Ave)x(S&P-Ave)
7/1/16
57.446472
0.56
2173.600098
8/1/16
58.043533
2170.949951
9/1/16
57.742203
2168.27002
10/1/16
61.009743
0.56
2126.149902
11/1/16
69.65522
2198.810059
12/1/16
69.10405
2238.830078
1/1/17
69.636215
0.56
2278.870117
2/1/17
71.520325
2363.639893
3/1/17
80.129959...
The risk-free rate, S&P 500 index, and the average return, standard deviation, beta, and residual standard...
The risk-free rate, S&P 500 index, and the average return,
standard deviation, beta, and residual standard deviation for three
funds are given.
Fund
Avg. Return
Std. Dev.
Beta
Residual Std. Dev.
A
B
C
S&P 500
Risk-free
18
25
22
12
4
15
30
20
10
0
1.3
1.4
1.2
1.0
0
1.5
2.5
3.0
1.Figure out the M2 measure for Fund A and B
2.Figure out the best fund based on the information ratio
Use the following table.
Your...
The risk-free rate, S&P 500 index, and the average return, standard deviation, beta, and residual standard...
The risk-free rate, S&P 500 index, and the average return,
standard deviation, beta, and residual standard deviation for three
funds are given.
Fund
Avg. Return
Std. Dev.
Beta
Residual Std. Dev.
A
B
C
S&P 500
Risk-free
18
25
22
12
4
15
30
20
10
0
1.3
1.4
1.2
1.0
0
1.5
2.5
3.0
Figure out the M2 measure
for Fund A and B.
Figure out the best fund based on the information
ratio.
Use the following table.
Your...
Please complete the sentence. If the excess return of the S&P 500 is 18 and the...
Please complete the sentence.
If the excess return of the S&P 500 is 18 and the ratio excess
return over beta for the firm CAL is 23, then ________ .
Select one:
It cannot be determined
CAL is fairly priced
CAL is overpriced
CAL is underpriced
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