Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 79% Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 27% 33 40 Your client decides to invest in your risky portfolio a proportion () 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 15%. Required: a. What is the proportion y? (Round your answer to 1 decimal place.) Proportion y %

Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 79% Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 27% 33 40 Your client decides to invest in your risky portfolio a proportion () 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 15%. Required: a. What is the proportion y? (Round your answer to 1 decimal place.) Proportion y %

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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A portrollo consists of assets with the following expected returns: Technology stocks Pharmaceutical stocks Utility stocks Savings account a. What is the expected return on the portfolio if the investor spends an equal amount on each asset? Round your answer to two decimal places. % 26% 16 9 4 b. What is the expected return on the portfolio if the investor puts 53 percent of available funds in technology stocks, 15 percent in pharmaceutical stocks, 14 percent in utility stocks, and 18 percent in the savings account? Round your answer to two decimal places. %
You are examining a portfolio manager’s active investing portfolio. The portfolio has a beta of 2 and has an average return of 15%. The risk free rate is 1% and the market return is 10%, is the manager’s active investing strategy working ?
An investor invests 30 percent of his wealth in a risky asset with an expected rate of return of 0.14 and a standard deviation of .35 and 70 percent in a T-bill that pays 3 percent. His portfolio's expected return and standard deviation are __________ and __________, respectively. Please show the formula
Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 27% 33 40 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 15%. Required: a. What is the proportion y? (Round your answer to 1 decimal place.) Proportion y 0.8 X %
You manage a risky portfolio with an expected rate of return of 14% and a standard deviation of 30%. The T-bill rate is 2%. Your client chooses to invest 65% of a portfolio in your fund and 35% in a T-bill money market fund. What is the reward-to-volatility (Sharpe) ratio (S) of your risky portfolio? Your client's? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Your reward-to-volatility (Sharpe) ratio Client's reward-to-volatility (Sharpe) ratio
Suppose now that your portfolio must yield an expected return of 13% and be efficient, that is, on the best feasible CAL. What is the proportion invested in the T-bill fund?
Question 1: Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. Stock A Stock B Stock C 1. Calculate the client expected return on the complete portfolio 2. Calculate the reward-to-variability ratio (Sharpe ratio): Part B A three-asset portfolio has the following characteristics: Expected Return Asset X Y Z 15% 10 6 Standard Deviation What is the expected return on this three-asset portfolio? 27% 33% 40% 22% 8 3 Weight 0.50 0.40 0.10
You manage a risky portfolio with an expected rate of return of 14% and a standard deviation of 28%. The T-bill rate is 7%. Your client chooses to invest 60% of a portfolio in your fund and 40% in a T-bill money market fund. Which of the following is closest to the Sharpe ratio of your client's complete portfolio? 35% 30% 25% 40%
You manage a risky portfolio with an expected rate of return of 19% and a standard deviation of 32%. The T-bill rate is 7%. Your client chooses to invest 50% of a portfolio in your fund and 50% in a T-bill money market fund. Suppose that your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 33 % 32 % 35 % What are the investment proportions of your client's overall portfolio, including the position in T-bills? (Round your answers to 1 decimal place.) T-Bills Stock A Stock B Stock C Investment Proportions % % % %
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 15% and a standard deviation of return of 16.0%. Stock B has an expected return of 11% and a standard deviation of return of 4%. The correlation coefficient between the returns of A and B is 0.50. The risk-free rate of return is 7%. The proportion of the optimal risky portfolio that should be invested in stock A is __________.
K You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 37%. The T-bill rate is 4%. Your client chooses to invest 80% of a portfolio in your fund and 20% in a T-bill money market fund. What is the reward-to-volatility (Sharpe) ratio (S) of your risky portfolio? Your client's? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Your reward-to-volatility (Sharpe) ratio Client's reward-to-volatility (Sharpe) ratio
You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 34%. The T-bill rate is 4%. Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolio's standard deviation will not exceed 10%. Required: a. What is the investment proportion, y? b. What is the expected rate of return on the complete portfolio?

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