2,25% and 6,25%, with a correlation of 50%. What would we the risk (standard deviation) of a portfolio with 100% return?

Q: If you plot the relationship between portfolio expected return and portfolio beta, what is the slope…

A: Beta is a measure of a security's or portfolio's volatility (or systematic risk) in comparison to…

Q: Consider two stocks A and B. Both have an expected return of 10%, and their standard deviations are…

A: The process of choosing a mix of securities or assets that optimizes returns for a given level of…

Q: Assume your portfolio standard deviation is 8 whereas the market has a standard deviation of 6.8.…

A: First we need to determine the systematic risk using the formula below:

Q: 2. Consider a market with an expected return of 20%, a risk (o) of 25% and a risk-free rate of 7%.…

A: Portfolio Risk: Portfolio risk refers to the degree of uncertainty or variability in the returns of…

Q: 1. Consider the table below which lists a set of portfolios with each of their expected return E(R)…

A: To create the efficient frontier, we plot the expected return (E(R)) on the y-axis and the standard…

Q: What is the standard deviation of an efficient portfolio with a 21.4-percent expected rate of…

A: ERP : 21.4%R(f): 6.4%ERM: 9.4%σM: 25.4%

Q: Table attached shows the historical returns for Companies A, B and C If one investor has a…

A: The expected return of the stock refers to the profits that the stock provides on average. It is…

Q: Which of the following portfolios should a risk averse investor choose? Portfolio Name σ(rP) Sharpe…

A: A risk averse investor looks to minimize risk and maximize the returns.Lower Standard deviation…

Q: A portfolio has a total return of 4.5%, a standard deviation of 40%, and a beta of 0.5. The market…

A: Market return, Rm = 12%Standard deviation of market return = 20% Market's treynor measure = 0.10 We…

Q: Consider the two (excess return) index model regression results for well-diversified portfolios A…

A: We have the two (excess return) index model regression results for well-diversified portfolios A and…

Q: You compute the optimal risky portfolio to have the expected return of 12% and standard deviation of…

A: Here, Expected Return of Portfolio  is 12% Standard Deviation is 20% Risk-free rate is 4% Risk…

Q: A portfolio has a variance of .0139, a beta of 1.13, and an expected return of 13.93%. What is the…

A: Sharpe ratio  is computed by following formula:-Sharpe ratio = whereRp=  expected return of…

Q: Which of the following portfolio risk-return combinations yields the best CAL for investors assuming…

A: The Capital Allocation Line (CAL) is a graphical representation used in portfolio theory to…

Q: Consider portfolio x with a beta of 1.3 and standard deviation of 25%. If the standard deviation of…

A: The portfolio will be considered as efficient or optimal if the standard deviation for the portfolio…

Q: Find the expected portfolio return and standard deviation if you were to invest 50% of your…

A: A portfolio is a group of investments in which an investor has invested funds or money. A portfolio…

Q: Consider a portfolio formed of two risky assets whose returns have a correlation of 0.5. What can be…

A: Risky assets are investment instruments that come with a certain degree of uncertainity regarding…

Q: 4. Asset Z has an expected return of 9.5 percent and a beta of 0.85. If the risk-free rate is 2.2…

A: We can determine the expected return of the portfolio using the formula below: Expected Return =…

Q: A portfolio has an average return of 14.4 percent, a standard deviation of 18.5 percent, and a beta…

A: The Sharpe ratio: The Sharpe ratio is one of the most commonly used measures to assess the…

Q: A portfolio has a total return of 4.5%, a standard deviation of 40%, and a beta of 0.5. The market…

A: Market return, Rm = 13.5%Standard deviation of market return = 20% Market's treynor measure = 0.10…

Q: Suppose CAPM is true. You are considering investing in an equally weighted portfolio of two stocks,…

A: Variance of two asset portfolio Consider a portfolio consisting of two assets asset A and asset B.…

Q: Your portfolio has a beta of 1.24, a standard deviation of 14.3 percent, and an expected return of…

A: Portfolio beta = 1.24 Standard deviation = 14.3% Expected return = 12.50% Market return = 10.7% Risk…

Q: If the simple CAPM is valid, which of the following situations are possible? Explain. Consider each…

A: The simple CAPM is a model that describes the relationship between the expected return and risk of a…

Q: A portfolio has an expected return of 16.78% and a variance of 1.03%. If the risk-free rate is…

A: The Sharpe ratio refers to the return of the portfolio that is adjusted for risk to determine the…

Q: An optimal risk portfolio’s expected return is 14%, standard deviation is 22%. If risk-free rate is…

A: The tradeoff between the return and risk of the portfolio is measured by the slope of CAL(Capital…

Q: What is the alpha of a portfolio with a beta of 2, an actual return of 22%, market- return of 12%,…

A: The risk free rate, market return and beta of a portfolio is given. And, the required return is…

Q: You calculated that the average retum of your portfolio is 3% and the standard deviation is 22%,…

A: The objective of this question is to calculate the Value at Risk (VaR) for a portfolio given the…

Q: Use the following information: ElrXOM E[TMS)=29.7%, standard deviationMS = 35.2% = 15.6%, standard…

A: Weight of XOM is 0.43 and weight of MS is 1-0.43= 0.57

Q: Asset A has a standard deviation of 0.17, and asset B has a standard deviation of 0.52. Assets A and…

A: It is a case where the portfolio consists of three assets. The two assets are risky assets and the…

Q: Suppose the risk free rate is 5% and the market portfolio has an expected return of 10%. Portfolio Z…

A: Beta assesses a stock's volatility relative to the broader market, focusing on systematic risk. It…

Q: What is the standard deviation of an efficient portfolio with a 20.9% expected rate of return given…

A: The degree of variance or dispersion in a collection of data is measured statistically using the…

Q: what is the risk-free rate?

A: The Sharpe ratio is a measure of a portfolio's risk-adjusted performance. It assists investors in…

Q: An asset has normally-distributed returns, with mean of 10.6% and standard deviation of 14.8%. What…

A: Confidence interval = 100% - 2%= 98%The z-score for a 98% confidence level can be found using a…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.