2. An investor is considering five securities in the portfolio with following expected return,standard deviation and beta:AssetsReturn %Apple30.0025.00Standard Deviation %0.1Beta1.40Microsoft9.0012.000.40Facebook15.0023.001.30Netflix22.0013.000.20Amazone35.0021.001.45Tesla25.0020.001.20The market, with index used as proxy, is expected to have a standard deviation of 13%.The investor has decided to put 10%, 20%, 15%, 25%, AND 15% respectively in Apple, ISYMicrosoft, Facebook, Netflix, Amazone and Tesla. Find out the expected return and riskof the portfolio.Of the total risk what risk is attributable to systematic risk and what risk is non-systematic(10)riskintheportfolio.

So, the estimated portfolio standard deviation is 7.31%. This suggests that nearly all the risk is…

Answered: 2. An investor is considering five…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 20P

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You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio X Y Z Market Risk-free Rp 14.0% 13.0 .8.5 12.0 7.2 Ор 39.00% 34.00 24.00 29.00 0 Bp 1.50 1.15 0.90 1.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.90. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places. R-squared
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 13.5% бр 35.00% 12.5 30.00 7.1 20.00 10.6 4.4 25.00 0 Вр 1.55 1.20 0.80 1.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.70. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places. × Answer is complete but not entirely correct. R-squared 0.9785
Baghiben
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 16.00% бр 32.00% 15.00 27.00 7.30 17.00 11.30 5.80 22.00 0 Bp 1.90 1.25 0.75 1.00 0 Assume that the tracking error of Portfolio X is 13.40 percent. What is the information ratio for Portfolio X? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places. Information ratio
Consider an investment portfolio that consists of three different stocks, with the amount invested in each asset shownbelow. Assume the risk-free rate is 2.5% and the market risk premium is 6%. Use this information to answer thefollowing questions.Stock Weights BetasChesapeake Energy 25% 0.8Sodastream 50% 1.3Pentair 25% 1.0a) Compute the expected return for each stock using the CAPM and assuming that the stocks are all fairly priced.b) Compute the portfolio beta and the expected return on the portfolio.c) Now assume that the portfolio only includes 50% invested in Pentair and 50% invested in Sodastream (i.e., a twoassetportfolio). The yearly-return standard deviation of Pentair is 48% and the yearly-return standard deviation ofSodastream is 60%. The correlation coefficent between Pentair’s returns and Sodastream’s returns is 0.3 What is theexpected yearly-return standard deviation for this portfolio?
7. The following data are available to you as portfolio manager: Security Estimated return (%) Beta A 40 3.0 B 35 2.5 30 1.0 D 17.5 1.8 E 20.0 1.5 Market Index 25 2.0 Govemment Security 17 a) In terms of the security market line, which of the securities listed above are underpriced? b) Assuming that a portfolio is constructed using equal proportions of the five securities listed above, calculate the expected retum and risk of such a portfolio.
Consider following information on a risky portfolio, risk-free asset and the market index. What is the T2 of the risky portfolio? Risky portfolio Risk-free asset Market index Average return 8.2% 2% 6% Std. Dev. 26% 20% Residual std. dev. 10% Alpha 1.4% Beta 1.2
Consider a portfolio comprise of three securities in the following proportion and with the indicated securities beta. Security Amount Invested Beta Expected return A 1.5million 1.0 12% B 1million 1.5 13.5% C 2million 0.8 9% Calculate the portfolio’s; Beta Expected return Determine whether this portfolio have more or less systematic risk than an average asset.
Show detailed steps to solve the following question. Consider a portfolio comprised of three securities in the following proportions and with the indicated security beta. a.) What is the portfolios beta? b.) Wht is the portfolios expected return?
a. Based on the following information, calculate the expected return and standard deviation for each of the following stocks. What are the covariance and correlation between the returns of the two stocks? Calculate the portfolio returm and portfolio standard deviation if you invest equally in each asset. Returns State of Economy Prob J K Recession 0.25 -0.02 0.034 Normal 0.6 0.138 0.062 Boom 0.15 0.218 0.092 b. A portfolio that combines the risk-free asset and the market portfolio has an expected return of percent and a standard deviation of 10 percent. The risk-free rate is 4 percent, and the Page 7 of 33 expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a 45 corelation with the market portfolio and a standard deviation of 55 percent? C. Suppose the risk-free rate is 4.2 percent and the market portfolıo has an expected return of 10.9 mercent Tibemadkat normfeliobasiabiamance…
In the APT model, what is the nonsystematic standard deviation of an equally-weighted portfolio that has an average value of σ(ei) equal to 20% and 40 securities? A. 0.5% B. 3.16% C. 3.54% D. 12.5% E. 625%
3. The following information is given with respect to stock A: Scenario Probability Market return 1 0.1 -0.18 2 0.3 0.07 3 0.4 0.16 4 0.2 0.21 Knowing that the Rfis 0.07 compute alpha and the information ratio. Portfolio P return -0.32 0.00 0.22 0.40

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