6- An investor invests 45% of his wealth in a risky asset with an expected rate of return of 0.20 and a variance of 0.12 and 65% in a T-bill that pays 4%. His portfolio's expected return and standard deviation are and respectively. 130 a) 0.197; 0.144 b) 0.098; 0.111 c) 0.086; 0.136 d) 0.112; 0.054

6- An investor invests 45% of his wealth in a risky asset with an expected rate of return of 0.20 and a variance of 0.12 and 65% in a T-bill that pays 4%. His portfolio's expected return and standard deviation are and respectively. 130 a) 0.197; 0.144 b) 0.098; 0.111 c) 0.086; 0.136 d) 0.112; 0.054

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: 3. Given that the CAPM holds, what is the lowest possible standard deviation for an investor who…

A: Standard deviation is the measure of risk and volatility and is measured as a deviation from the…

Q: 3. Asset 1 has an expected return of 10% with a standard deviation of 25%, and asset 2 has an…

A: To find the optimal portfolio consisting of risky assets and risk-free asset we can use the Capital…

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: Now assume that your portfolio only includes a risky asset, Asset C and a risk-free asset, Asset D.…

A: Here,Weight Alloted to Risky Asset Asset C is 30%Exoected Return to Risk Free Asset Asset D is…

Q: Assume that you manage a risky portfolio with an expected rate of return of 18% and a standard…

A: The investment proportions of the individual assets are given above on the basis of 50% of…

Q: Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets (P)…

A: Expected return of T-bill = 3.60%Proportion of complete portfolio in P (Wp)= 80%Proportion of…

Q: The optimal risky portfolio has an expected return of 15% and a standard deviation of 10%. The…

A: Optimal risky portfolio is suitable to risk averse investors who want to minimise their investment…

Q: You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of…

A: Here,Return on risky asset is 0.11Return on risk-free asset is 0.045Standard deviation of risky…

Q: An investor put half her money in Firm 1 and half in Firm 2, resulting in a portfolio with a…

Q: The expected return on the market is 11% and the standard deviation of returns on the market is…

A: The standard deviation of risk free asset = 0%

Q: Asset A offers an expected rate of return of 25%, with a standard deviation of 20%. Asset B offers…

A: Optimal risky portfolio of two assets A and B is the portfolio with certain weights of asset A and…

Q: You plan to put 50% of your wealth into each assets. What would the expected return be for the…

A: Expected return on a portfolio is the rate of return that is required to generate from the…

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: 4) Your portfolio consists of two stocks. Stock X has an expected return of 8% and a standard…

A: Portfolio is a combination of various assets which are held to restrict the risk and maximize the…

Q: You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 36%.…

A: Given, Expected return = 17% Standard deviation = 36% T-bill rate = 6%

Q: You manage a risky portfolio with an expected rate of return of 19% and a standard deviation of 31%.…

A: Given information: Expected rate of return of a risky portfolio is 19%, Standard deviation is 31%,…

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: If E(rX)=0.12 and E(rY)=0.08, what would be the expected rate of return of a portfolio made of 30%…

A: Given the following information: Expected return from investment X = 0.12 Expected return from…

Q: Exercise 6: a. Calculate the rate of return and standard deviation for the portfolio composed of 20%…

A: Weight of A = 20%Weight of B = 80%Return on asset A = 10%Return on asset B = 20%Sigma A= 15%Sigma B=…

Q: q4- The expected return on the market is 11% and the standard deviation of returns on the market is…

A: Expected return is the expected value on the investment which is expressed in percentage terms based…

Q: Which asset in the following table has the most market risk (also known as systematic or non-…

A: Systematic risk refers to the type of risk which has an impact on the entire market. Also known as…

Q: a. You manage a risky portfolio with E(r) =18% and σ = 28%. The T-Bill rate is 8%. Your client…

A: Expected return = weight of risk portfolio *return of risky portfolio + weight of tbill * risk free…

Q: An investor with a risk aversion of 3.5 can buy a risk-free asset with an expected return of 3% and…

A: A portfolio is a collection of assets such as stocks, bonds, and cash equivalents held by an…

Q: Suppose that a fund that tracks the S&P has mean E(RM) = 16% and standard deviation OM = 10%, and…

A: Standard Deviation is mesaure the risk which is involved in earning the return from the stock. Lower…

Q: Suppose we have two risky assets, Stock I and Stock J, and a risk-free asset. Stock I has an…

A: Given:

Q: (1) The standard deviation of a portfolio that has 40% of its value invested in a risk-free asset…

A: Standard Deviation: It refers to the stand-alone risk associated with the securities. It measures…

Q: Asset 1 has a standard deviation of 0.10 and an expected return of 7%. Asset 2 has a standard…

A: Standard deviation of Asset 1 (sd1) = 0.10Expected return of Asset 1 (Er1) = 7%Standard deviation of…

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: ou invest 50% of your wealth in risky asset A and 50% in the risk-free asset. E(ra) is 10% and OA is…

A: The question gives equal weights to both the risky asset and riskfree asset. We can determine the…

Q: 3.1 Problem 3: You have access to two investment opportunities. Mutual Fund A, which promises 20%…

A: In order to calculate the weights of each asset, let us assume we invest “wA” proportion in Mutual…

Q: 8. Given the following information what must be the risk-free rate of interest (assume the asset is…

A: R=rf+β*(rm-rf)R=Expected return of assets = 12.89%Beta β =0.82Expected return of market (rm) =…

Q: What is the expected return of a portfolio of two risky assets if the expected return E(Ri),…

A: A collection of multiple investment avenues in which an investor puts in the funds is considered a…

Q: Suppose you invest equal amounts in a portfolio with an expected return of 16% and a standard…

A: Solution:- Standard deviation of returns of portfolio means the average variability of returns of…

Q: Suppose the risk-free rate is 5%. The expected return and standard deviation of a risky asset are…

A: Expected return (Re) = 10% Risk free rate (Rf) = 5% Standard deviation (SD) = 20%

Q: The market risk premium (E[Rm]-Rf) is 6%. The risk-free rate (Rf ) is 2%. Asset X has beta equal to…

A: Here, Market Risk Premium is 6% Risk Free Rate is 2% Beta of Asset X is 0.8 Expected Return of Asset…

Q: 2. Consider two assets, S and B. The expected return on S is 12.2% while the expected return on B is…

A: Expected Return: The anticipated gain or loss from an investment, calculated as the weighted average…

Q: An investor invests 75% of his wealth in a risky asset with an expected rate of return of 28% and a…

A: Investment in Risky Asset = 75% Expected Return on risky asset = 28% Investment in Treasury bill…

Q: The beta on risky asset A is 1.8 and the beta on risky asset B is 1.1. The expected return on the…

A: As Capital Asset pricing Model hold good, Expected Return of Stock = Risk Free rate + (market rate…

Q: An investor invests 30 percent of his wealth in a risky asset with an expected rate of return of…

A: Weight of risky assets = 30%Return of risk assets = 0.14Standard deviation of risky assets…

Question

6 -
An investor invests 45% of his wealth in a risky asset with an expected rate of return of 0.20 and a variance of
0.12 and 65% in a T-bill that pays 4%. His portfolio's expected return and standard deviation are
and
, respectively.
130
a) O 0.197; 0.144
b) O 0.098; 0.111
c) O 0.086; 0.136
d) O 0.112; 0.054

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

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

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

Risk-free rate is 7%, expected return on the market portfolio is 12%. Identify the correct equation for Security Market Line (SML): a. r = 5% + b(7%) b. r = 7% + b (12%) c. r = 7% + b (5%) d. r = 5% + b (12%)
You invest $96 in a risky asset and the T-bill. The risky asset has an expected rate of return of 19% and a standard deviation of 0.22, and a T-bill with a rate of return of 4%. A portfolio that has an expected outcome of $110 is formed by investing what dollar amount in the risky asset? Round your answer to the nearest cent (2 decimal places).
Supposing the return from an investment has the following probability distribution Return Probability R (%) 8 0.2 10 0.2 12 0.5 14 0.1 Required: What is the expected return of the investment? What is the risk as measured by the standard deviation of expected returns?
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
An investor invests 70% of his wealth in a risky asset with an expected rate of return of 0.15 and a variance of 0.04. He also places 30% of his wealth in a T-bill that pays 5%. His portfolio's expected return and standard deviation are __________ and __________, respectively. Group of answer choices 0.120; 0.14 0.087; 0.06 0.295; 0.12 0.087; 0.12 0.895; 0.11
9- Consider two perfectly negatively correlated risky securities, K and L. K has an expected rate of return of 13% and a standard deviation of 19%. L has an expected rate of return of 10% and a standard deviation of 18%. The weights of K and L in the global minimum variance portfolio are and respectively. a) O 0.50; 0.50 b) O 01383 0.24; 0.76 c) O 0.49; 0.51 d) O 0.46; 0.54 e) O 0.76; 0.24
Father Time asks us what is the expected return on asset A if it has a beta of .75, the expected market return is 12%, and the risk- free rate is 4%? А. 6.0% В. 6.5 C. 7.0 D. 8.0 E. 10.0
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent.The risk-free rate is 4 percent, and the expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. Compute and justify the expected rate of return would a security earn if it had a 0.45 correlation with the market portfolio and a standard deviation of 55 percent.
Suppose you are considering investing your entire portfolio in three assets A, B and C. You expect that after you invest, four possible mutually exclusive scenarios will occur, with associated returns (in %) for each of the three assets as listed below. The probability of each scenario is given below. A B C Probabilities return 0.05 0.50% -3.60% 3.60% 0.35 0.60% 2.75% 0.15% 0.45 3.66% 1.45% 0.45% 0.15 -4.80% -0.60% 6.30% Find the expected returns and standard deviations of Asset A, B & C. (HINT: the expected return is given by the probability-weighted sum of returns in each scenario. The expected standard deviation is given by the square root of the probability-weighted sum of squared deviations from the expected return.) Is there any reason to invest in Asset A given its low expected return and high standard deviation?
1. A stock has a beta of 1.15 and an expected return of 14 percent. A risk-free asset Currently earns 4.2 percent. a . What is expected return on a portfolio that is equally in inverted assets? b. if portfolio of the two assets has beta of 75, what are the portfolio weights? C. if a portfolio of the two assets has an expected return of 8 percent .what is its beta? the two
1. Suppose you have n risky assets you can combine in a portfolio. Each risky asset has an expected return of 8% and a standard deviation of 30%. The risky assets are uncorrelated with each other. (a) Consider an equally weighted portfolio of 2 of these securities. What is its expected return? What will its standard deviation be? (b) Consider an equally weighted portfolio of 30 of these securities. What is its expected return? What will its standard deviation be? (c) Suppose we let the number of these securities increase without bound. That is, n→ ∞o. What happens to the standard deviation of an equally weighted portfolio of these securities as the number of assets in the portfolio becomes extremely large? What will the riskless rate be in this case, and why? -int IDE
What is the expected market return if the expected return on asset A is 19% and the risk free rate is 5%? Asset A has a beta of 1.4. Assume that the CAPM is correct. a. 5% b. 9% c. 13% d. 15% e. 19%

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