As an active fund manager, you have obtained information on three individual stocks, the market index, and T-bills as follows: Asset Expected Return (%) Total Standard Deviation (%) Beta Stock 1 20.0 80.00 1.8 Stock 2 16.0 60.00 1.4 Stock 3 6.0 50.00 0.8 Market Index 10.0 40.00 1.0 T-bills 4.0 0.00 0.0 You decide to use the above information to form an optimal active portfolio, consisting of the three individual stocks. Determine the corresponding weights for the three stocks in the optimal active portfolio. Show your work.
As an active fund manager, you have obtained information on three individual stocks, the market index, and T-bills as follows: Asset Expected Return (%) Total Standard Deviation (%) Beta Stock 1 20.0 80.00 1.8 Stock 2 16.0 60.00 1.4 Stock 3 6.0 50.00 0.8 Market Index 10.0 40.00 1.0 T-bills 4.0 0.00 0.0 You decide to use the above information to form an optimal active portfolio, consisting of the three individual stocks. Determine the corresponding weights for the three stocks in the optimal active portfolio. Show your work.
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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As an active fund manager, you have obtained information on three individual stocks, the market index, and T-bills as follows:
|
Asset |
Expected Return (%) |
Total Standard Deviation (%) |
Beta |
|
Stock 1 |
20.0 |
80.00 |
1.8 |
|
Stock 2 |
16.0 |
60.00 |
1.4 |
|
Stock 3 |
6.0 |
50.00 |
0.8 |
|
Market Index |
10.0 |
40.00 |
1.0 |
|
T-bills |
4.0 |
0.00 |
0.0 |
You decide to use the above information to form an optimal active portfolio, consisting of the three individual stocks. Determine the corresponding weights for the three stocks in the optimal active portfolio. Show your work.
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