Amir is looking forward to invest in the market. Risk free rate of return from the investment is 5 percent; the return expected on the Market Portfolio is 15 per cent; the Standard Deviation of a Market Portfolio is 11 percent and Standard Deviation of the Portfolio 9 percent. The Actual Return provided to Mr. Hammad 14 %. You are required to calculate Hammad estimated Rate of Return.

Amir is looking forward to invest in the market. Risk free rate of return from the investment is 5 percent; the return expected on the Market Portfolio is 15 per cent; the Standard Deviation of a Market Portfolio is 11 percent and Standard Deviation of the Portfolio 9 percent. The Actual Return provided to Mr. Hammad 14 %. You are required to calculate Hammad estimated Rate of Return.

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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Your father asks for an investment advice. Currently, he has Ghc100,000 invested in portfolio P, which has an expected return of 10.5% and a volatility of 8%. Suppose the risk free rate is 5%, and the tangent portfolio has an expected return of 18.5% and a volatility of 13%. a) To maximize his expected return, without increasing his volatility, which portfolio would you recommend? b) If your father prefers to keep his expected return the same but minimize his risk, which portfolio would you recommend.
Expected return and standard of a risky portfolio are 11% and 21% respectively. Risk-free rate is 5%. Mr. Yen constructed a complete portfolio with these two assets, which maximises his utility. If the standard deviation of his complete portfolio is 15.75%, what is the value of Mr. Yen’s risk aversion coefficient? (You must show all necessary workings)
Consider the following information about a risky portfolio that youmanage, and a risk-free asset: E(rP ) = 11%, σP = 15%, rf = 5%.a) Your client wants to invest a proportion of her total investment budget in your riskyfund to provide an expected rate of return on her overall or complete portfolio equal to8%. What proportion should she invest in the risky portfolio, P, and what proportionin the risk-free asset? b) What will be the standard deviation of the rate of return on her portfolio? c) Another client wants the highest return possible subject to the constraint that you limithis standard deviation to be no more than 12%. Which client is more risk averse?
Compute the expected rate of return of Miss Dimaano considering her security for her work as a freelance investment banker based on the following figures: Risk free rate = 4%; Expected return of the market = 12%; Systematic risk b of the security = 1.3.
Assume that you manage a risky portfolio with an expected rate of return of 14% and a standard deviation of 30%. The T-bill rate is 6%. Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 13% a. What is the proportion y? (Enter your answer as a decimal number rounded to 2 decimal places.) Proportion y b. What is the standard deviation of the rate of return on your client's portfolio? (Enter your answer as a percentage rounded to two decimal places.) Standard % per year deviation
According to Mr. Santos' calculations, he should invest the same amount in an asset with a risk-free interest rate of 4% and in a stock with an expected return of sixteen percent and a standard deviation of 18 percent. Estimate the expected return on the portfolio. 12% 9% 4% 10%
State the return rate (in %) for your optimal portfolio.
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).
Use this input to answer following questions: You manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 20%. The T-bill rate is 8%. a) Your client chooses to invest 60% of a portfolio in your fund and remaining money in an essentially risk-free money market fund. What is the expected value and standard deviation of the rate of return on his portfolio? (2 Marks) b) What is the reward-to-volatility (Sharpe) ratio (S) of your risky portfolio? (1 Mark)
Ebenezer Scrooge has invested 50% of his money in share A and the remainder in share B. He assesses their prospects as follows: A B Expected return (%) 15 21 Standard deviation (%) 22 24 Correlation between returns 0.6 a. What are the expected return and standard deviation of returns on his portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b. How would your answer change if the correlation coefficient were 0 or –0.60? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Mr. Karim is an investment banking analyst at Benchmark Financial, and hewants to calculate the expected rate of return for a security. He finds that thesystematic risk “b” of the security is 1.2. He also knows that the risk-free rateis 3%, and the expected return of the market is 12%. Mr. Karim uses the CAPMmodel to calculate the expected rate of return and determine if theinvestment should be undertaken. Please show the computation as perdecision taken by Mr. Karim.
You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 28%. The T-bill rate is 7%. Your client's degree of risk aversion is A = 2.0, assuming a utility function u E(r) = A0². a. What proportion, y, of the total investment should be invested in your fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Investment proportion y Expected return Standard deviation - % b. What are the expected value and standard deviation of the rate of return on your client's optimized portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) % %

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