An asset has an average return of 11.03 percent and a standard deviation of 21.10 percent. What range of returns should you expect to see with a 95 percent probability? O-10.07% to 32.13% O-31.17% to 53.23% O-52.27% to 74.33% O-10.07% to 11.99%

An asset has an average return of 11.03 percent and a standard deviation of 21.10 percent. What range of returns should you expect to see with a 95 percent probability? O-10.07% to 32.13% O-31.17% to 53.23% O-52.27% to 74.33% O-10.07% to 11.99%

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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Consider the following table which provides a comparison of the returns for a portfolio and its benchmark. Year 0 1 2 3 4 5 Return Alpha Sum Tracking Error Information Ratio Note: the numbers in red are negative b. Calculate the portfolio alpha in percentage terms c. Calculate the tracking error of the portfolio in percentage terms Portfolio Return 16% 9% -35% 22% 84% Required a. Calculate the annualised return of the portfolio and the benchmark in percentage terms d. Calculate the information ratio of the portfolio to 2 decimal places e. Determine to 2 decimal places the amount of Carhart alpha for the portfolio in percentage terms if: o the risk-free rate is 3.25%, o the return of the market is 9.20%, o the exposure to the value factor (when the premium is 3.15%) is 0.65 (ie 65%), o the exposure to the small cap factor (when the premium is 2.05%) is -0.12, and o the exposure to the momentum factor (when the premium is 46%) is 0.1. Benchmark Return 14% 7% -38% 18% 86%
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1. Determine the expected return and the variance of the portfolio formed by the two assets S₁, S₂ with weights ₁ = 0.6, x2 = 0.4. The assets returns are described by the following scheme: scenario W1 2لا W3 probability 0.1 0.4 0.5 T1 -20% 0% 20% 12 -10% 20% 40%
11.9
Suppose two asset returns are described by a two factor model, n = 0% + 11 + 1.82 + e1 2 = -1% + 2/1 + 0.52 + e2 where the volatility of first factor is 30%, the volatility of the second factor is 10%, and the correlation between the two factors is 0.5. Suppose also that the volatilities of the error terms ej and ez are both 10%. What is the covariance of n and r2 ? (Nearest 0.0001).
Given the following probability distribution, what are the expected return and the standard deviation of returns for Security J? State Pi ri 1 0.5 11% 2 0.3 8% 3 0.2 5% O 9.40%; 2.04% O 8.90%; 2.34% O 7.40%; 2.94% O 8.40%; 2.64% O 7.90%; 1.74%
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You are given the following possible returns for Security J. Given this information, determine the coefficient of variation for Security J State Probability G 1 30% 10% 25% 18% 14% 24% 27% 2 3 4 O 0.3907 O 0.3847 O 0.3721 O 0.4040 00.3597 31%
Consider the following two assets: Asset Expected return Standard deviation of returns 1 18% 30% 2 8% 10% The returns on the two assets are perfectly negatively correlated (i.e. coefficient of -1). Calculate the proportions of assets 1 and 2 that generate a portfolio with a standard deviation of zero. What is the expected return of that portfolio?
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