12.Assume the market portfolio can be decomposed into three large portfolios X, Y and Z representing respectively all stocks in three distinct economic sectors (such as Industry, Agriculture, Services). Their respective market capitalizations are 40%, 50% and 10% of the market capitalization respectively. You also know the X has a beta of 1.8, Y has a beta of 0.3, what’s the beta of portfolio Z? a.1.3 b.0.9 c.0.2 d.-0.3

Q: 3. Consider three stocks A, B and C and a market index M with the following prices: Year то T1 T2…

A: Note: This question has several sub-parts. The first three have been answered below

Q: c) Assume that using the Security Market Line (SML) the required rate of return (Ra) on stock A is…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Mansukh

A: The beta of A is 0.45Beta of B is 1The SD of A is 0.28SD of B is 0.21SD of market is 16%.Weight of A…

Q: Data: So=102; X = 115; 1 + r=1.1. The two possibilities for ST are 146 and 84. Required: a. The…

A: Step 1:To find the hedge ratio of the put, we need to determine the change in put price relative to…

Q: The expected returns for David’s portfolio were calculated based on three possible conditions in the…

A: Standard deviation is a measure of unsystematic risk which shows the variability of returns of a…

Q: Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free…

A: The risk-free rate, also known as the risk-free interest rate or risk-free return, refers to the…

Q: Using the spreadsheet answer question (c) please

A: Given,  Volatility of the market = 10% Expected Return = 8% Risk-free rate = 3%

Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…

A: ParticularsStock AStock BBeta1.201.50R-square0.250.15σM16%Weight0.700.30

Q: 2. Consider a portfolio of three stocks. The weights of the three stocks are 0.2, 0.3, and 0.5. The…

A: The Capital Asset Pricing Model is a model that describes the relationship between the expected…

Q: 10. The Capital Asset Pricing Model and the security market line Keith holds a portfolio that is…

A: In order to compute the expected return, the CAPM formula should be considered:

Q: You are not given the expected return of stock X. The correlation of the returns on the stock X a…

A: Beta of stock shows the risk and volatility related to risk and volatlity related to the overall…

Q: You are given the following information concerning three portfolios, the market portfolio, and the…

A: > R -squared  = Correlation ^2> Here> Correlation = 0.72

Q: The following questions are related to modern portfolio theory. • Assume there are only two stocks…

A: 1. Expected return of portfolio comprising of two risky assets or stocks is computed by following…

Q: b) Suppose that you observe the following information in Table 2 for stocks A and B: Table 2…

A: Single index model: Ri=αi+βiRm+ei Ri=excess return over risk free rate

Q: You invest in a portfolio of 5 stocks with an equal investment in each one. The betas of the 5…

A: Number of Stock = n = 5 Betas = 0.75, -1.2, 0.90, 1.3  and 1.5Risk free rate = rf = 4%Market Return…

Q: Suppose you group all the stocks in the world into mutually exclusive portfolios (each stock is in…

A: Data given:DescriptionValue StocksGrowth StocksExpected…

Q: What is the required rate of return for Stock X based on the capital asset pricing model (CAPM)?

A: Required Rate of Return for Stock: It is a minimum acceptable rate of return for equity investors…

Q: Baghiben

A: Portfolio Performance MeasuresWe can calculate the Sharpe ratio, Treynor ratio, and Jensen's alpha…

Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…

A: Given:   Constant Beta Standard deviation Proportions A 2.60% 0.9 21% 0.7 B -2.00% 1.2 12%…

Q: (Security market line) You are considering the construction of a portfolio comprised of equal…

A: Beta for each asset:For asset A = 2.30For asset B = 0.80For asset C = 0.60For asset D = -1.60Each…

Q: portfolio made up of the following three stocks if you want to distribute your investment as…

A: Return on portfolio is weighted average return of portfolio.

Q: Suppose that the index model for stocks A and B is estimated from excess returns with the following…

A: Portfolio consists of a combination of the assets i..e stocks, bonds, etc which are managed by the…

Q: b. Consider the following information about three stocks: Probability of State of Economy 0.40 0.60…

A: Here,SHJSHTSHKState of EconomyProbabilityReturnsReturnsReturnsBoom0.47%28%15%Recession0.613%-5%3%

Q: The Capital Asset Pricing Model (CAPM) says that the risk premium on a stock is equal to its beta…

A: Capital asset pricing model is a formula that projects the relationship between systematic risk and…

Q: You are given the following information concerning three portfolios, the market portfolio, and the…

A: The information ratio is a measure used to evaluate the risk-adjusted performance of an investment…

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.