a. Expected return Variance Standard deviation b. Expected risk premium % % %

Q: If correlation coefficient between an individual security and market is 0.64, the total risk of the…

A: The question related to Portfolio Management.

Q: For a elght-security portfolio, it is necessary to calculateunique covariances plus variances, -1--…

A: Covariance is the statistical measures which determine the relationship between the returns of two…

Q: Find the variance &Standard deveation of the portfolio

A: Excel Spreadsheet:

Q: In a regression of the single-index model, the R-square is 68%, residual variance is 0.08, beta…

A: R square = 68% = 0.68 residual variance (σe^2)= 0.08 Beta (B) = 0.7 Let σm^2 = Market variance

Q: What is the expected return on a two asset portfolio and what are its variance and standard…

A: Two Asset portfolio: The portfolio that has 2 assets is called as two asset portfolio.

Q: Coefficient of Variation

A: Please note that I'm assuming that we need to calculate the Coefficient of variation of the 2…

Q: Expected accumulated value for investment A: Expected accumulated value for investment B: Investment…

A: The expected return is a concept in finance that represents the anticipated gain or loss on an…

Q: a. If Sharon were risk neutral, which investment would she select? Explain why. b. If she were risk…

A: Risk Neutral-This type of investor is insensitive to risk i.e., while making investment decision,…

Q: What is the total variance of the following portfolio including 2 assets invested in the ratio of…

A: Formula to be used: Portfolio variance=(WA2 x σ2A)+(WB2 x σ2B)+ (2 x WA x σA x WB x σB x r) Data…

Q: f a stock's variance of return is written as σ2, then its standard deviation will be written as:

A: Standard deviation and variance are the measures of risk and volatility and both are important…

Q: For minimum variance portfolio,the weight of Asset A1 Ltd in two asset portfolio ,having correlation…

A:

Q: When determining the riskiness of a stand-alone instrument (not included in a portfolio), which of…

A: The asset risk is classified into 2 terms  One is stand alone risk in which we consider  only the…

Q: Asset A has an expected return of 37% and a standard deviation of 40%. The risk-free rate is 13%.…

A: Expected Rate of Return = R = 37%Standard Deviation = sd = 40%Risk free rate = rf = 13%

Q: In a two-asset portfolio, a covariance of returns between the two securities will lead to the…

A: Adding assets which move in different directions reduces the overall risk. This is because there is…

Q: Calculate volatility and lower partial moment using the data below. ( , ) Target return is 0% Rate…

A: No. Return Return - mean 6.95 (return - mean)2 1 8.3 1.35 1.82 2 6.8 -0.15 0.02 3 -2.4 -9.35…

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: Define the following terms: Factor risk premium Unit root Random walk with drift…

A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…

Q: A 1 Stock A 2 Expected return, E(r) 3 Return standard deviation, GA 4 5 Stock B 6 Expected return,…

A: Portfolio return:In the world of investing, a portfolio return is an important indicator that…

Q: 30. Based on the Regression result for KLIC, if Variance of the Residuals is equal 0.0126 and…

A: Variance of the Residual Risk=0.0126 And variance of SPY=0.0037

Q: Asset A has an expected return of 14% and a standard deviation of 20%. The risk-free rate is 8%.…

A: The reward-to-variability ratio (also called the Sharpe ratio) refers to the measure of the return…

Q: Returns             Year   X     y   1   17  %   20  % 2   20     32   3   11     15   4 – 7   – 18…

A: arithmetic average =sum of return/5 Arithmetic average =17+20+11-7+10/5=51/5=10.2 Arithmetic average…

Q: Assume we beleive a 1 factor APT model describes securities returns. Consider 2 assets with the…

A: We need to use the formulae inscribed in portfolio management for arbitrage pricing theory ( APT ).…

Q: a. What is the expected return of each asset? b. What is the variance and the standard deviation of…

A:

Q: beta value on risk-return ratio

A: The risk-return ratio measures the return in terms of risk for a specified period of time. The…

Q: 17. The purpose of computing a minimum variance hedge ratio is to minimize the variance of the: (a)…

A: Minimum Variance Hedge Ratio is also known as optimal  hedge ratio. The minimum variance hedge ratio…

Q: investments with low return variances usually: a. have a high return standard deviation b. have…

A: d. none of these options   SINCE THE INVESTMENTS WITH  LOW RETURN VARIANCE HAS LOW STANDARD…

Q: What is the coefficient of variation (CV) of an asset with expected return 5% and standard deviation…

A: The coefficient of variation is used by investors in determining how much risk or volatility is…

Q: The measures of risk include Geometric Mean Arithmetic Mean Median Variance

A: The risk is very important in the stock market and we must quantify the risk so that it can be…

Q: The the expected return, the the risk. O a. lower; higher O b. higher,lower O c. higher; higher more…

A: Expected return and risk are correlated

Q: 16. What is the total variance of the following portfolio including 2 assets invested in the ratio…

A: Formula to be used: Portfolio variance=(WA2 x σ2A)+(WB2 x σ2B)+ (2 x WA x σA x WB x σB x r) Data…

Q: Which of the following are measurements of risk? range coefficient of variation mean average…

A: The measurements of risk are range, coefficient of variation, standard deviation, and median.…

Q: Given Portfolio 1 Expected Return= 0.15 Portfolio variance = 0.001 Standard Deviation = 0.0316…

A: A portfolio is the combination of various financial assets into one basket with the aim to earn…

Q: Example 3 ss oont alaft A Following Example 2, consider a porfolio with three assets S1, S2 and S3…

A: Note: This post has three subparts.  The second part contains a reference to an optimal portfolio…

Q: Consider the Excel template for the two-asset efficient frontier as provided in the announcement for…

A: Expected Returns and the risk of a portfolio: The expected return of a portfolio is the weighted…

Q: According to modern financial theory, the correct measure of risk is Idiosyncratic Risk Variance…

A: Theer are various measures of risk when it comes to the company's investment in different financial…

Q: According to mean-variance rule A. The expected return of X is at least equal to the expected return…

A: As per Mean Variance Rule, For same level of return, investor choose one with lower variance and for…

Q: he variance of expected returns is equal to the square root of the expected returns. a. True b.…

A: Formula for variance:S2=∑(Xi-X̄) 2/n S2=VarianceXi=Value of one observationX̄=Mean value of all…

Q: 3. Given ft = 0.02 -0.08(1 - exp(-0.1t)) for t = 1,..., 30. Plot forward rate curve ft and implied…

A: 1. : Forward rate, an interest rate applicable to a financial transaction that will occur in the…

Q: Under the stop-loss reinsurance model, suppose the total claim follows exponential distribution with…

A: Insurance firms frequently employ stop loss reinsurance as a risk management tactic to reduce their…

Q: 2) Calculate the envelope set (frontier) for the following four assets and show that the individual…

A: In this question we will be calculating the Envelope Set for the four assets and plotting the…

Q: Given the following probability distribution, compute for Outcome Probability Expected Return 20%…

A: As information expected return is as follows:   Probability Return Expected return A B C=A*B…

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.