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A portfolio manager summarizes the input from the macro and micro forecasters in the following table: (see image )  a. Calculate expected excess returns, alpha values, and residual variances for these stocks. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round "Alpha values" to 1 decimal place.)   b. Compute the proportion in the optimal risky portfolio. (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.)   c. What is the Sharpe ratio for the optimal portfolio? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)   d. By how much did the position in the active portfolio improve the Sharpe ratio compared to a purely passive index strategy? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)   e. What should be the exact makeup of the complete portfolio (including the risk-free asset) for an investor with a coefficient of risk aversion of 3.2? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

A portfolio manager summarizes the input from the macro and micro forecasters in the following table: (see image )  a. Calculate expected excess returns, alpha values, and residual variances for these stocks. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round "Alpha values" to 1 decimal place.)   b. Compute the proportion in the optimal risky portfolio. (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.)   c. What is the Sharpe ratio for the optimal portfolio? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)   d. By how much did the position in the active portfolio improve the Sharpe ratio compared to a purely passive index strategy? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)   e. What should be the exact makeup of the complete portfolio (including the risk-free asset) for an investor with a coefficient of risk aversion of 3.2? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Essentials Of Investments
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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A portfolio manager summarizes the input from the macro and micro forecasters in the following table:

(see image ) 


a. Calculate expected excess returns, alpha values, and residual variances for these stocks. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round "Alpha values" to 1 decimal place.)
 

b. Compute the proportion in the optimal risky portfolio. (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.)

 

c. What is the Sharpe ratio for the optimal portfolio? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

 

d. By how much did the position in the active portfolio improve the Sharpe ratio compared to a purely passive index strategy? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

 

e. What should be the exact makeup of the complete portfolio (including the risk-free asset) for an investor with a coefficient of risk aversion of 3.2? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

 

Micro Forecasts Expected Return (%) Beta Residual Standard Asset Deviation (%) Stock A 21 1.3 52 Stock B 18 1.6 62 Stock C 17 1.1 58 Stock D 10 1.2 50 Macro Forecasts Expected Standard Return Deviation Asset (%) (%) T-bills 6 Passive equity portfolio 15 25
Transcribed Image Text:Micro Forecasts Expected Return (%) Beta Residual Standard Asset Deviation (%) Stock A 21 1.3 52 Stock B 18 1.6 62 Stock C 17 1.1 58 Stock D 10 1.2 50 Macro Forecasts Expected Standard Return Deviation Asset (%) (%) T-bills 6 Passive equity portfolio 15 25
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