An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 25% while the standard deviation on stock B is 15%. The correlation coefficient between the return on A and B is 0.40. What is the standard deviation of return on the minimum variance portfolio? Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 25% while the standard deviation on stock B is 15%. The correlation coefficient between the return on A and B is 0.40. What is the standard deviation of return on the minimum variance portfolio? Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

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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An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 20%, while the standard deviation on stock B is 15%. The correlation coefficient between the returns on A and B is 0%. The rate of return for stocks A and B is 20% and 10% respectively. The standard deviation of return on the minimum-variance portfolio is Multiple Choice 12% 17% 0% 6%
An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free rate is 6%, the expected return on the first factor (r1) is 12%, and the expected return on the second factor (r2) is 8%. If bi1 = 0.7 and bi2 = 0.9, what is Crisp’s required return?
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 0.14 and a standard deviation of return of 0.18. Stock B has an expected return of 0.15 and a standard deviation of return of 0.23. The correlation coefficient between the returns of A and B is 0.67. The risk-free rate of return is 0.11. The proportion of the optimal risky portfolio that should be invested in stock A is Please answer in decimal terms rounded to four decimal places.
Calculate the Sharpe ratio, Treynor ratio, M-squared and Jensen's alpha for a stock with an expected return of 11%, standard deviation of 16% and a market beta of 1.4. The expected market return is 9%, the standard deviation of the market return is 12% and the risk-free rate is 4%. Would you invest in this stock or not? (Your answer might change depending on your current portfolio allocation).
Assume you have an optimal risky portfolio with an expected return of 17% and a standard deviation of 27%, if the current risk free rate is 5% what is the optimal percentage to invest in ORP (y*)? Please write all percentages as decimals (for example write .242 instead of 24.2%). Use a risk aversion measure (A) of 2. Note: Correct answer is 0.8230 Please explain?
answer must be correct
Consider a risky portfolio, A, with an expected rate of return of 0.15 and a standard deviation of 0.15, that lies on a given indifference curve. Which one of the following portfolios might lie on the same indifference curve? A. E(r) = 0.15; Standard deviation = 0.20 B. E(r) = 0.20; Standard deviation = 0.15 C. E(r) = 0.10; Standard deviation = 0.10 D. E(r) = 0.10; Standard deviation = 0.20 E. E(r) = 0.15; Standard deviation = 0.10
You compute the optimal risky portfolio to have the expected return of 12% and standard deviation of 20%. The risk free rate is 4%. What will be the standard deviation of the complete portfolio of risk free asset and the optimal risk portfolio, for a risk averse investor with risk aversion index A=6. O 1.11 О 3.33 O 5.67 O 6.67 O None of above
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 18% and a standard deviation of return of 20%. Stock B has an expected return of 14% and a standard deviation of return of 5%. The correlation coefficient between the returns of A and B is .50. The risk-free rate of return is 10%. The proportion of the optimal risky portfolio that should be invested in stock A is
Carl plans to add one of two alternative stocks to his portfolio. Stock A has a correlation of 0.70 with his portfolio and Stock B has a correlation of 0.10. Both stocks have the same standard deviation of returns. Based on this information, relative to Stock A, Stock B will result in: a. less total risk and more active risk for the portfolio b. less total risk and less active risk for the portfolio С. more total risk and less active risk for the portfolio d. more total risk and more active risk for the portfolio
Your client is considering purchasing stocks. The actual return of one o his choices follows here. Assist him by calculating the standard deviation and advise him what the risk is. Stock 'A' Actual Returns = 6%, 12%, 8%, 10% 0.0164 0.0258 0.0542 0.1072

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