A portfolio earned 16% in the past year. The target beta is 1.0 and the actual beta was 1.20. The S. 500 index and the portfolio have a standard deviation of 12% and 20% respectively. Market returr 10% and Risk-free rate is 2%. The Net selectivity is: 0.98% 0.67% O 0.78% 0.60%

Q: Coca Cola - 25.51% Pfizer - 14% CVS - 32.99% Berkshire Hathaway - 29.66%

A: In this question we will be creating portfolio with different weights of each asset to maximize the…

Q: Portfolio A returned 9.20% p.a. over the evaluation period compared to 5.00% p.a. for the S&P 500.…

A: Portfolio A and S&P 500 are two different investment portfolios with different combinations of…

Q: Suppose the free retum is 2.3% and the market portfolio has an expected retum of 10.5% and a…

A: The Capital Asset Pricing Model (CAPM) is a financial model that describes the relationship between…

Q: SkyHi Corp.'s beta is 1.2. The expected market return is 6.4%. The risk-free rate is 3.7%. Find…

A: Capital Asset Pricing Model(CAPM) is used to find out cost of equity or expected return of a risky…

Q: what is the Sharpe ratio of this portfolio?

A: Information Provided: Return = 25.30% Standard deviation = 31% T-bills = 5%

Q: Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 8.25%, and the risk-free…

A: Here, The question demands required rate of return of market not of stock therefore to calculate the…

Q: expected return on the market is 9%. The CAPM required rate of return on a stock with a beta of 1.5…

A: Capital Asset Pricing Model (CAPM) helps estimate how much return an investment should…

Q: During the year just ended, Anna Schultz's portfolio, which has a beta of 0.91, earned a return of…

A: Beta = 0.91Returns  = 8.4%Risk-free rate = 3.3%Return on market portfolio = 9.1%

Q: A portfolio has an expected annual return of 12.2% and a standard deviation of 18.2%. What is the…

A: Given Information: Annual expected return = 12.2% Annual standard deviation = 18.2%

Q: Suppose the risk-free return is 4.1% and the market portfolio has an expected return of 9.3% and a…

A: In CAPM; Capital Asset Pricing Model, the expected return for a single stock is ascertained by…

Q: Consider a portfolio with expected annual return of 21.1% and volatility of 38%. Determine an…

A: Required:Compute the analytical Value at Risk for one month.

Q: Far Horizon Journeys has an expected return of 9.90%, the risk-free rate is 2.20%, and the market…

A: Expected Return = 9.90% Risk Free Rate = 2.20% Market Risk Premium = 6.85%   Beta = ?

Q: Bell Weather, Inc. has a beta of 1.25. The return on the market portfolio is 12.5%, and the…

A: We require to calculate the Bell Weather Inc stock's required rate of return using CAPM from the…

Q: A portfolio consists of two securities: a 90-day T-bill and the S&P/TSX Composite. The expected…

A: Portfolio's expected return is the weighted average of it's individual components' returns.The…

Q: A stock is estimated to have a covariance with the market of 0.45. For the coming period, the market…

A: The Capital assets pricing model shows the relationship between the risk-free rate and the expected…

Q: A portfolio has a standard deviation of 2.9% and a Sharpe ratio of 4.7. If treasury bills currently…

A: Solution:Sharpe ratio refers to the excess return of portfolio over risk free securities by taking…

Q: he risk-free rate is 8% and the expected return on a market portfolio is 13%. If a share has a beta…

A: Risk free rate = 8% Market return = 13% Stock beta = 1.20

Q: 1. The current price of a stock is P100 and has volatility (o) of 0.25. The continuous risk free…

A: Hello. Since you have posted multiple questions and not specified which question needs to be solved,…

Q: Assume the CAPM holds. Rf6%. The market portfolio has an expected return of 22% and standard…

A: Step 1: CAPM (Capital Asset Pricing Model):The CAPM is a financial model that relates the expected…

Q: The risk premium on the market portfolio is estimated at 8 % with a standard deviation of 22 %. What…

A: Risk premium The greater rate of return you can anticipate from riskier investments, like stocks, as…

Q: Given the market expected return of 10%, standard deviation of market return of 15% and a risk free…

A: In the given question we need to compute the expected return of an efficient portfolio from the…

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 standard deviation of returns of a particular stock is 43% and that of the market is 35%. The…

A: Beta measures the market risk of any stock. A beta can be negative, positive, 0 or 1. A beta of 1…

Q: Portfolio XYZ had a return last year of 14%. The risk-free rate of return was 3%. The market return…

A: Portfolio Alpha is that amount which is the difference between the actual return and CAPM return…

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: Stock A has a beta of 0.6 and return as per CAPM 8% and stock B has a beta of 1.2 with a return as…

A: Capital Asset Pricing Model (CAPM): The capital asset pricing model is based on the modern portfolio…

Q: The market risk premium is 10% and the risk-free rate is 4%, beta of the stock is 0.75, then…

A: The Capital Asset Pricing Model (CAPM) refers to the model which tells us how the financial markets…

Q: the returns on Magee companys stock have a standard deviation of 30% and a correlation with the…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: If the expected return on the market is 16%, then using the historical risk premium on large stocks…

A: In the given problem we require to calculate the risk free rate from following details: Expected…

Q: The risk-free rate of interest is 5% and the market risk premium is 8%. Miller Corporation has a…

A: We can determine the required return on stock using Capital Asset Pricing Model. CAPM formula:…

Q: A portfolio has an expected annual return of 14.9 percent and a standard deviation of 18.5 percent.…

A: The Value at Risk is a metric which measures the extent of losses at the given level of…

Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…

A: Rate of S and P=2+8=10%Rate of treasury bill=2%Standard deviation of S and P=

Q: A portfolio with a 25% standard deviation generated a return of 15% last year when T-bills were…

A: Given: Standard deviation 25%= 0.25 Average yearly return is 15%= 0.15 And T-bill of 4.5℅= 0.045

Q: You have at hand the historical monthly excess returns of Strategy X over 12 months. In additic you…

A: Alpha is a determination to determine the excess return from the intrinsic return we get from…

Q: According to the tangency portfolio allocation, stock A contributes 10%, stock B contributes 40%,…

A: Expected return of portfolio 10%-0.5*2%=11%

Q: The yield on 3-month Treasury bill is 3.5%, the investor's risk aversion is 2.5, and standard…

A: To estimate the expected rate of return of the market, we can use the Capital Asset Pricing Model…

Q: the required return on portfolio is 18% risk free rate is 6% and the market return is 14% calculate…

A: Given: Rp = 18% (required return on portfolio) Rf = 6% (risk free rate of portfolio) Rm = 14%…

Q: The risk-free rate is 6% and the market risk premium is 5%. Your $1 million portfolio consists of…

A: We will first have to find the beta of the portfolio. Portfolio beta = sum of (weights of securities…

Q: You estimate that the expected return of the portfolio is 8% and that the standard deviation is 15%.…

A: VaR stands for "Value at Risk". It is a statistical technique used to estimate the maximum amount of…

Q: Suppose the risk-free return is 5.3% and the market portfolio has an expected return of 10.2% and a…

A: We need to use CAPM model to calculate expected rate of return. Expected return =Risk free…

Q: Assume that the short-term risk-free rate is 3%, the market index S&P500 is expected to pay returns…

A: The question is based on the concept of capital asset pricing model (CAPM) , the model used to…

Q: Suppose the​ risk-free return is 3.7% and the market portfolio has an expected return of 8.8% and a…

A: To assess market behaviour, one uses the Capital Asset Pricing Model (CAPM). The concept is based on…

Q: During a particular year, the T-bill rate was 6%, the market return was 14%, and a portfolio manager…

A: Alpha denotes unsystematic risk and beta denotes sensitivity of the company for the systematic…

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.