Assume that an investor has formed a portfolio of two assets; Asset A and Asset B. if he invested 30% of his wealth in asset A. If the return on asset A is 20% and the return on asset B is 40%, the weight of the wealth invested in asset B is? What is the portfolio return?

Assume that an investor has formed a portfolio of two assets; Asset A and Asset B. if he invested 30% of his wealth in asset A. If the return on asset A is 20% and the return on asset B is 40%, the weight of the wealth invested in asset B is? What is the portfolio return?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 3SEQ: The expected period of time that will elapse between the date of a capital investment and...

See similar textbooks

Related questions

Q: Two investments, X and Y, have the characteristics shown below. E(X) = $70, E(Y)%3D$120, o =7,000, o…

A: Expected Return on Portfolio = (Weight of security X * Return on security X ) + (Weight of security…

Q: Consider a portfolio with two assets and three states of nature at the end of the year. Would it be…

A: In the field of finance, portfolio management involves constructing a combination of assets to…

Q: You can invest in a portfolio of two assets: the riskfree asset with rate of return 6%, and a risky…

A: The question is based on the basis of calculation for risk aversion in the Indian system. The risk…

Q: Now assume that your portfolio only includes a risky asset, Asset C and a risk-free asset, Asset D.…

A: Here,Weight Alloted to Risky Asset Asset C is 30%Exoected Return to Risk Free Asset Asset D is…

Q: If you perform a NPV analysis on a perspective investment using a "d" = 15% and: a. the…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: Sam has a portfolio of three assets. Determine the expected rate of return for the portfolio…

A: Expected Return: The expected return is the minimum required rate of return which an investor…

Q: A portfolio consists of assets with the following expected returns (refer to image): a. What is the…

A: A portfolio refers to the mixture of different kinds of funds and securities for the investment.

Q: You plan to put 50% of your wealth into each assets. What would the expected return be for the…

A: Expected return on a portfolio is the rate of return that is required to generate from the…

Q: Consider two assets, A and B. A earns +4%, -5%, or +3%, in scenarios 1, 2, and 3. B earns -5%, +3%,…

A: The calculations for the expected rates of return and standard deviations for each asset, and the…

Q: You are going to invest $20,000 in a portfolio consisting of assets X, Y, and Z, as follows: Asset…

A: Beta of portfolio is the weighted sum of the beta of all the assets in which investment was done.…

Q: An investor has an investment that has produced the following returns: Year 1: 10%, Year 2: 5%, Year…

A: Arthmetic mean is rate of return that is calculated by summing up all returns and dividing by the…

Q: Suppose an investor wants to invest $X in a one-month portfolio consisting of ONE risk-free asset…

A: Investors typically cannot "short" risk-free assets, as they are considered safe investments with…

Q: Assuming you invest 50% in project A and 50% in project B, what will be the portfolio rate of return…

A: The answer is as fallows

Q: Suppose you visit with a financial adviser, and you are considering investing some of your wealth in…

A: Expected return is the probability weighted average of individual state returns.

Q: You can invest in a portfolio of two assets: the riskfree asset with rate of return 10%, and a risky…

A: Risk free rate(rf) is 10% Expected return(Er) of 14% Standard deviation is 35% To Find: Utility…

Q: Consider the following information: The possible rate of return for a portfolio for an investment is…

A: expected return of investment =∑npn×rnwhere,pn=probabiltyrn=rate of return

Q: Two investments generated the following annual returns (refer to image): a. What is the average…

A: A statistical measure that represents the variation in the return on the stock is term as the…

Q: An investor invests 75% of his wealth in a risky asset with an expected rate of return of 28% and a…

A: Investment in Risky Asset = 75% Expected Return on risky asset = 28% Investment in Treasury bill…

Q: You are going to invest $50,000 in a portfolio consisting of assets X, Y, and Z, as follows; What…

A: Expected return of the portfolio can be calculated by averaging the returns of assets in proportion…

Q: e. Calculate the Portfolio Return when you know that its composition is as follows: Asset A: Weight…

A: Portfolio Return: The gain or loss generated by an investment portfolio encompassing a variety of…

Q: An investor invests 30 percent of his wealth in a risky asset with an expected rate of return of…

A: Weight of risky assets = 30%Return of risk assets = 0.14Standard deviation of risky assets…

Q: Use the following table to calculate the expected return from the asset. Return Probability 0.1…

A: Expected return from the asset = Return x Probability

Q: Find the expected returns and standard deviations of Asset A, B & C. (HINT: the expected return is…

Q: Possible returns and their probabilities for an asset is given in the table below. The expected…

A: The asset's returns and the probability of each return are provided in the…

Q: You invest R100 in a risky asset with an expected rate of return of 15% and a standard deviation of…

A: Given, The amount invested is R100. The expected return on risky asset is 15% and rate of return on…

Q: A particular firm’s portfolio is composed of two assets, which we will call" A" and "B." Let X…

A: " Hi, Since you asked multiple sub-parts questions, we will answer the first three sub-parts for you…

Q: asset, risky as shown below. For example, 20% in risk-free and 80% in A, or 30% in risk-free and 70%…

A: Expected rate is the rate that can be expected from a portfolio based on the composition of the…

Q: An investor has $1000 initial wealth for investment and he borrows another $500 at the risk free…

A: Beta coefficient is a measure of systematic risk of an individual security or portfolio. It measures…

Q: Suppose you are considering investing your entire portfolio in three assets A, B and C. You expect…

A: Expected return and standard deviation of a stock say "X" can be calculated as: Here, i…

Q: a. What is the average expected return, r, for each asset over the 3-year period? b. What is the…

A: Please note that under the answering guidelines only up to 3 subparts can be solved. Kindly repost…

Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

What is the portfolio return?

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2 : weight of asset B

VIEW

Step 3 :calculation of portfolio return

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

You are going to invest $50,000 in a portfolio consisting of assets X, Y, and Z, as follows; What is the expected return of this portfolio? Calculate the beta coefficient of the portfolio
Assume you have two assets A and B. You know the expected return and standard deviation of returns for each asset. This information is shown in the table below. You plan to put 50% of your wealth into each assets. What would the expected return be for the portfolio? Asset A B 0.03 0.27 0.135 0.15 returns 12% 15% standard deviations 20% 40%
Now assume that your portfolio only includes a risky asset, Asset C and a risk-free asset, Asset D. If the expected return on Asset D is 18%, the expected return on your po is 12% and the percentage of your wealth allocated to Asset C is 30%, what is the risk-free rate?
Mansuk
Suppose you are considering investing your entire portfolio in three assets A, B and C. You expect that after you invest, four possible mutually exclusive scenarios will occur, with associated returns (in %) for each of the three assets as listed below. The probability of each scenario is given below. A B C Probabilities return 0.05 0.50% -3.60% 3.60% 0.35 0.60% 2.75% 0.15% 0.45 3.66% 1.45% 0.45% 0.15 -4.80% -0.60% 6.30% Find the expected returns and standard deviations of Asset A, B & C. (HINT: the expected return is given by the probability-weighted sum of returns in each scenario. The expected standard deviation is given by the square root of the probability-weighted sum of squared deviations from the expected return.) Is there any reason to invest in Asset A given its low expected return and high standard deviation?
Suppose you are considering investing your entire portfolio in three assets A, B and C. You expect that after you invest, four possible mutually exclusive scenarios will occur, with associated returns (in %) for each of the three assets as listed below. The probability of each scenario is given below (Attached image). Find the expected returns and standard deviations of Asset A, B & C. (HINT: the expected return is given by the probability-weighted sum of returns in each scenario. The expected standard deviation is given by the square root of the probability-weighted sum of squared deviations from the expected return.) Is there any reason to invest in Asset A given its low expected return and high standard deviation?
Sam has a portfolio of three assets. Determine the expected rate of return for the portfolio assuming he invests 50 percent of his money in asset A with a 10 percent rate of return, 30 percent in asset B with a 20 percent rate of return, and the remainder in asset C with a 30 percent rate of return?
You can invest in a portfolio of two assets: the riskfree asset with rate of return 10%, and a risky portfolio with expected return 14% and stdev 35%. You optimally choose to invest equal amount in the two assets. What is your utility?
Assuming you invest 50% in project A and 50% in project B, what will be the portfolio rate of return and risk?
A particular firm’s portfolio is composed of two assets, which we will call" A" and "B." Let X denote the annual rate of return from asset A, and let Y denote the annual rate of return from asset B. Suppose that E(X) = 0.15, E(Y) = 0.20, SD (X) = 0.05, SD (Y) = 0.06, and CORR (X, Y) = 0.30. Use a spreadsheet to perform the following analysis. (a) What is the expected return of investing 50% of the portfolio in asset A and 50% of the portfolio in asset B? What is the variance of this return? (b) Replace CORR (X, Y) = 0.30 by CORR (X, Y) = 0.60, 0, -0.30, and -0.60 and answer the questions in part (a). What is the impact of correlation on the expected returns and its variance? Explain why this is so. (c) Suppose that the fraction of the portfolio that is invested in asset B is f, and so the fraction of the portfolio that is invested in asset A is (1 – f). Let f vary from f = 0.0 to f = 1.0 in increments of 5% (that is, f = 0.0, 0.05, 0.10, 0.15, ...), and compute the mean and the…
e. Calculate the Portfolio Return when you know that its composition is as follows: Asset A: Weight 25%, Return 11% Asset B: Weight 45%, Return 14% Asset C: Weight 30%, Return 16%
Suppose you visit with a financial adviser, and you are considering investing some of your wealth in one of three investment portfolios: stocks, bonds, or commodities. Your financial adviser provides you with the following table, which gives the probabilities of possible returns from each investment: Stocks Bonds Commodities Probability Return Probability Return Probability Return 20% 15% 0.15 20% 0.6 10% 0.2 0.2 12.5% 0.4 7.5% 0.2 0.25 0.2 0.4 3.8% 0.2 0.2 0% To maximize your expected return, you should choose O A. commodities. B. bonds. OC. stocks. OD. All of the portfolios have the same expected return