6. Fund A Fund B Expected Ret. E(r) 13.4 % . 10.8% Standard Deviation - 13 %. 15.8% The table above contains expected annual returns for funds A and B. Assuming that the risk free rate is 2.55% and that the correlation of returns between funds A and B is -0.18, calculate the weight of Fund A in the minimum - variance two - risky asset portfolio comprised of funds A and B.

6. Fund A Fund B Expected Ret. E(r) 13.4 % . 10.8% Standard Deviation - 13 %. 15.8% The table above contains expected annual returns for funds A and B. Assuming that the risk free rate is 2.55% and that the correlation of returns between funds A and B is -0.18, calculate the weight of Fund A in the minimum - variance two - risky asset portfolio comprised of funds A and B.

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

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The average return, standard deviation, and beta for Fund A is given below along with data for the S&P 500 Index. Fund Average Return Standard Deviation Beta A 25.7% 29% 1.3 S&P 500 17.9% 20% 1 Risk-free 3.8% Calculate the M2 measure of performance for Fund A. Use the correct sign if the answer is negative! Example: -1.23
Consider the following risk-return characteristics for funds A and B: Expected return Risk Fund A (Equity) 12% 20% Fund B (Debt) 9% 16% The correlation coefficient between the returns of fund A and fund B is 0.4. 1. Which Fund is riskier? Write 1 if your answer is Fund A, write 2 if your answer is Fund B, or write 3 if your answer is undetermined. 2.1 What is the weight of fund A in the minimum variance portfolio? 2.4 What is the risk of the minimum variance portfolio? 2.2 What is the weight of Fund B in the minimum variance portfolio? 2.3 What is the expected return of the minimum variance portfolio?
a. Using the data in the table below and calculate the following performance measures
Review the table below listing performance metrics for selected assets. The metrics are defined in the same way as in CAPM. Compute the CAPM alpha for the four assets (data attached as image).
You have estimated the single index model (SIM) fund B and found that its alpha and beta are 0.035 and 1.1 respectively. The standard deviation of Fund B's excess returns is 30% and the market portfolio excess returns have a standard deviation of 20%. What's the information ratio of Fund B?
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 8%. The characteristics of the risky funds are as follows: Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.11. Expected Return 19% 12 Required: a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds? a-2. What are the expected value and standard deviation of the minimum-variance portfolio rate of return? Req A1 Complete this question by entering your answers in the tabs below. Reg A2 What are the investment proportions in the minimum-variance portfolio of the two risky funds? Note: Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places. Portfolio invested in the stock Portfolio invested in the bond Standard Deviation 32% 15 Req A1 A pension fund manager is considering three mutual funds. The…
What is the standard deviation of the portfolio that invests equally in all three assets M, N, and O?
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
Asset X has an expected return of 6% and a variance of 0.001. Asset Y has an expected return of 12% and the same variance as X (i.e., 0.001). The returns of assets X and Y are uncorrelated, and the risk-free rate is 3%. Find the variance of the highest Sharpe ratio portfolio that can be formed of the two risky assets X and Y.
a) Calculate Sharpe's measure of performance for Wildcat Fund. b) Calculate Treynor's measure of performance for Wildcat Fund.
Which of the following assets dominates Asset X that has 9% expected return andstandard deviation of 11% according to the mean-variance criterion? Asset V: 9.4% expected return, 10% standard deviation Asset R: 8.5% expected return, 7% standard deviation Risk-free asset: 3% expected return, 0% standard deviation Asset S: 11.2% expected return, 14% standard deviation
Which asset in the following table has the most market risk (also known as systematic or non-diversifiable risk)? (Ch. 8) Asset Return Beta Standard Deviation Asset A 9% 0.95 20% Asset B 13% 1.10 35% Asset C 10% 1.00 40% Group of answer choices Asset A Asset C Asset B and Asset C Asset B

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