37. Assume the managed portfolio expected return is 30% and standard deviation is 40%. The market portfolio has an expected return of 20% with standard deviation of 30%. The t- bill rate is 5%. What is the M2 measure of this portfolio? O a. 3.75% O b. 5 % O c. 9.92% O d. 2.38% O e. 1.5%

37. Assume the managed portfolio expected return is 30% and standard deviation is 40%. The market portfolio has an expected return of 20% with standard deviation of 30%. The t- bill rate is 5%. What is the M2 measure of this portfolio? O a. 3.75% O b. 5 % O c. 9.92% O d. 2.38% O e. 1.5%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: a (i) 25% and (ii) 14% b (i) 21% and (ii) 12% c (i) 25% and (ii) 12% d None of the above e (i) 21%…

A: Given, Economic Condition Probability(P) Boom 0.1 Good 0.6 Recession 0.3

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: If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below…

A: Capital Asset Pricing Model:It is a financial model that estimates an investment's or asset's…

Q: am. 132.

A: The expected return of the portfolio can be calculated using the Capital Asset Pricing Model (CAPM).…

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: What is the total risk of portfolio as per Sharpe's Single Index Model if standard deviation of…

A: Total Risk = Systematic Risk + Unsystematic risk Systematic Risk = Beta 2 * SD of Market2 = (1.27)2…

Q: Given there are two assets making up a portfolio where each asset has the following characteristics:…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

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: M4

A: Information ratio = Return of portfolio-Return of benchmarkTracking errorTracking error = Risk of…

Q: 6. A zero-risk portfolio has a standard deviation of: A. 0% B. 1% C. 100% D. Infinity

A: The standard deviation measures the systematic (market risk) and the unsystematic risk…

Q: A portfolio's return was 15% and the standard deviation was 20%. The market return was 5% and the…

A: The M2 measure, an expanded and more practical version of the Sharpe ratio, calculates the…

Q: The expected return on the market is 15% with a standard deviation of 12.5% and the risk-free rate…

A: Explanation : If the Expected return from the stock is equal to actual return from the stock it…

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: 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: 3. The risk free rate is 2% and the expected return and standard deviation on the market is 12% and…

A: Risk free Return (Rf ) = 2% Return of Market (Rm) = 12% Standard Deviation of market = 20%

Q: For investment A, the probability of the return being 20.0% is 0.5, 10.0% is 0.4, and -10.0% is 0.1…

A: Probability Return 0.5 20% 0.4 10% 0.1 -10%

Q: 3. Given the following information, compute the (1) portfolio return and (2) the portfolio risk…

A: Portfolio Return: It refers to the return expected by an investor on a portfolio containing various…

Q: 6. A zero-risk portfolio has a standard deviation of: A. 0% В. 1% C. 100% D. Infinity

A: Answer and calculations are given below

Q: Your firm has estimated the following cash flows for tw mutually exclusive capital investment…

A: Discounting payback period is calculated by discounting the cash flows of the projects. Discounting…

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

A: The Sharpe ratio evaluates returns relative to risk, the Treynor ratio assesses systematic risk, and…

Q: What is the expected return of a portfolio composed of 70% of the optimal risky portfolio and 30% of…

A: Expected return is the amount of money that an investor can expect to either gain or lose with…

Q: USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset (A) Asset (B) E(RA) = 10% E(RB) = 15%…

A: Standard deviation of the portfolio is the statistical measure to determine the risk of change in…

Q: Suppose you create a minimum-variance portfolio by combining two perfectly negatively correlated…

A: A minimum variance portfolio is the portfolio that gives lowest possible risk for a given…

Q: The following expected return and the standard deviation of current returns are known: Security…

A: Portfolio standard deviation is the standard deviation of all the different investments in the…

Q: Assume that you manage a risky portfolio with an expected rate of return of 20% and a standard…

A: Standard deviation is the quantitative measure of risk of stock return and is measured as the…

Q: assume that the following data available for the portfolio, calculate the expected return, variance…

A: Given: Expected return of A =12.5% Expected return of B = 18.5% Standard deviation of A = 15%…

Q: Consider two assets A and B with expected return as 9% and 5%, respectively. Standard deviation of…

A: The expected return of Portfolio is calculated with the help of following formula Er(p) = Er (A) ×…

Q: f your portfolio consists of 20% RHJ(expected return 2.8%) 35% Pav( expected return 7.8%), ano 45%…

A: A portfolio comprises of three stocks in a given proportion. The expected return and the standard…

Q: Consider the following portfolio (assume an equal probability of a boom or a bust): Asset Port.…

A: Investors must carefully evaluate both the risk and return associated with a portfolio.To address…

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

A: Alpha= Portfolio return - Expected return= Rp - (Rf + B*(Rm-Rf))= 13.6%-(5%+1.25*(11.5%-5%))= 0.475%

Q: Portfolio Portfolio Expected Return Beta 4.53 % 2.20 X % 43.55 X % 65.10 X % 86.65 X % 108.20 X %…

A: Given, Expected return of asset W = 13.15% Beta of asset W = 1.28 Risk free rate = 4.53% Note: 1.…

Q: What is the standard deviation for a portfolio invested 50% in A, 50% in B? Probability 0.5 0.25…

A: Portfolio standard deviation measures the risk of the portfolio and is dependant upon the standard…

Q: Plot the following risky portfolios on a graph: Portfolio B C D E F Expected return, % 10 12.5 14 16…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: 8. If the CAPM is valid, is the following situation possible? Portfolio A B Expected Return 5% 40%…

A: Capital Asset Pricing Model:It is a financial model that estimates an investment's or asset's…

Q: d. Create a portfolio P comprising Firms A and B. Calculate P's average return and standard…

A: Detailed explanation: Step-by-Step Explanation:1. Portfolio Return Calculation:The portfolio's…

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: Suppose a portfolio is given as follows: Securities Weight BPW CJW AJT O 6.0% O 5.0% 0.3 O 5.1% 0.4…

A: Expected return of the portfolio is calculated using following equation Expected return of portfolio…

Question

37. Assume the managed portfolio expected return is 30% and standard deviation is 40%. The market portfolio has an expected return of 20% with standard deviation of 30%. The t-
bill rate is 5%. What is the M² measure of this portfolio?
Ⓒa. 3.75%
O b. 5%
O c. 9.92%
O d. 2.38%
O e. 1.5%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Formula for M2 measure

VIEW

Step 2: calculation

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

efficient portfolio
The expected return for asset A is 4.00% with a standard deviation of 9.00%, and the expected return for asset B is 6.75% with a standard deviation of 3.00%. Based on your knowledge of efficient portfolios, fill in the blanks in the following table with the appropriate answers. Proportion of Portfolio in Security A WA 1.00 0.75 0.50 0.25 0.00 Proportion of Portfolio in Security B WB 0.00 0.25 0.50 0.75 1.00 Expected Portfolio Return FP 4.00% 4.69% 6.06% 6.75% Standard Deviation Op Case I (PAB= -0.4) 6.5 4.1 2.5 3.0 Standard Deviation op Case II (PAB= 0.3) 9.0 5.2 3.6 3.0 The minimum risk portfolio allocation to asset A within the portfolio for case III is. Therefore, you are better off Standard Deviation op Case III (PAB=0.8) 9.0 7.4 5.8 ▼ 3.0
Sample Problem: Investment Market Rate 12% 10% ? 15% A B с D Beta 1.5 (.5) 1.0 ? CAPM ? ? 10% 12% If risk free rate is at 2%, supply the missing values of the summarized table for the portfolio of investment.
Q6. ) A portfolio is formed by investing 32% in Asset-1; 28% in Asset-2; and 40% in Asset-3. The covariances of the three assets with the market portfolio are 24, 36, and 48. The variance of the market portfolio is 40. If the risk - less rate is 7.5%, and the expected return on the market portfolio is 12.5%, what is the expected return of this portfolio, assuming that the CAPM is valid?
Suppose the risk-free return is 2% and the return on the market is 10%. The beta of a managed portfolio is 1.5, and the average realized return is 13%. According to the CAPM, Jensen’s alpha of the managed portfolio is: A) –1% B) 0% C) 1% D) 2% E) none of the above
What is the standard deviation of the portfolio that invests equally in all three assets M, N, and O?
Solve step by step
Consider the following portfolio of assets: Loan Weight 1 0.30 2 0.70 Expected returni ம σ2 13% 11% 9.06% 82.0% P12=-0.87 8.72% 76.0% 012-75.0% What is the variance of the portfolio (round to two decimals)? Note: a^2 denotes the square of a. For example, 2^2 = 4, 3^2=9 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + (0.3) (0.7)(-0.87) (9.06%) (8.72%) = 30.19 (0.3)^2 (82.0%) + (0.7)^2*(76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 15.75 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + [(0.3) (0.7)]^2 (-0.87) (9.06%) (8.72%) = 41.59 (0.3) (82.0%) + (0.7) (76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 48.93
Suppose Asset A has an expected return of 10 percent and a standard deviation of 10 percent. Asset B has an expected return of 20 percent and a standard deviation of 20 percent. If the correlation between A and B is (- 1), what are the expected return and standard deviation for a portfolio comprised of 40 percent Asset A and 60 percent Asset B?
3
Asset B has a beta of 1.2 and an expected return of 16%. The risk-free rate is 4%. If you wish to hold a portfolio with a beta equal to 1.0, what is the expected return of the portfolio? 13.0% 10.0 % 15.0 % 12.0% 14.0%
The risk - free rate is 5.25%. The expected return on the market is 12% with a standard deviation of 18%. What is the standard deviation of an efficient portfolio with a 16% expected return? 7.33 % 10.12% 28.67% 19.11%

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS