Assume the CAPM holds. You are holding a portfolio with the beta of 2 and the standard deviation of 60%. The expected return on the market portfolio is 15% and the standard deviation of returns on the market portfolio is 20%. The risk-free rate is 4%. How much more expected return without increase in the risk of your portfolio can you earn if you make your portfolio efficient? 11% more than I earn now 13% more than I earn now O 10% more than I earn now 17% more than I earn now My portfolio is already efficient, I cannot earn more without increasing the risk of my portfolio

Assume the CAPM holds. You are holding a portfolio with the beta of 2 and the standard deviation of 60%. The expected return on the market portfolio is 15% and the standard deviation of returns on the market portfolio is 20%. The risk-free rate is 4%. How much more expected return without increase in the risk of your portfolio can you earn if you make your portfolio efficient? 11% more than I earn now 13% more than I earn now O 10% more than I earn now 17% more than I earn now My portfolio is already efficient, I cannot earn more without increasing the risk of my portfolio

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 two well-diversified portfolios: Portfolio 1 has an expected return of 8% and a beta of 0.80 while Portfolio 2 has an expected return of 13% and a beta of 1.50. If the risk-free rate is 1.5%, which portfolio would a rational risk-averse investor prefer and why? O A. Portfolio 2 because it has the higher reward to risk ratio. O B. Portfolio 1 because it has the higher reward to risk ratio. OC. Portfolio 2 because it has the higher reward. O D. Portfolio 1 because it has the lower risk.
Consider a portfolio that offers an expected rate of return of 13% and a standard deviation of 20%. T-bills offer a risk-free 4% rate of return. What is the maximum level of risk aversion for which the risky portfolio is still preferred to T-bills? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Maximum level of risk aversion must be
Give typing answer with explanation and conclusion
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 ?
Suppose that you currently have $100,000 invested in a portfolio with an expected return of 13% and a volatility of 8%. The efficient (tangent) portfolio has an expected return of 17% and a volatility of 10%. The risk-free rate of interest is 1%. Suppose that you want to keep the expected return equal to the current rate of 13%. Accordingly, the level of risk you can expect is: 1.00% 3.75% 4.75% 5.15% None of the above
You build a portfolio containing stocks ?A and ?B only and you have shorted ?B such that its portfolio weight is −0.25−0.25. If the expected return on ?A is 15% and on ?B is 13%, what is the expected return (in %) on the portfolio?
9. Plot the following risky portfolios on a graph: B 10 11 Portfolio A Expected return, % 8 Standard Deviation, % 13 C D E F 12.5 14 16 20 15 19 19 22 G 20 25 H 23 33 a) Which of these portfolios are efficient? Which portfolios are inefficient? b) Suppose you can also borrow and lend at an interest-rate of 10 percent. Which of the above portfolios is the best one? c) Suppose you are prepared to tolerate a standard deviation of 15 percent. What is the maximum expected return that you can achieve if you cannot borrow nor lend? d) What is your optimal strategy, if you can borrow or lend at 10 percent and are prepared to tolerate a standard deviation of 15 percent? What is the maximum expected return that you can achieve?
Consider the single factor APT. Portfolio A has a beta of 1.5 and an expected return of 20 %. Portfolio B has a beta of 0.7 and an expected return of 16%. The risk - free rate of return is 8%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio and a long position in portfolio
You want your portfolio beta to be 1.16. Currently, your portfolio consists of $3,000 invested in stock A with a beta of 1.64 and $2,000 in stock B with a beta of 0.75. You have another $5,000 to invest and want to divide it between an asset with a beta of 1.48 and a risk-free asset. How much should you invest in the risk-free asset? Multiple Choice O O O O 1575 1500 225 1230 510
In an economy where the Capital Asset Pricing Model(CAPM) holds, the riskfree interest rate is 1%. The expected return of the market portfolio is 16% and its standard deviation is 20%. Suppose there is a portfolio with expected return of 25%. What should be its standard deviation? Select one: a.31.25% b.30% c.32% d. Insufficient information to determine the answer.
the CAPM world, the average investor’s risk aversion parameter is 2 and the standard deviation of the market portfolio is 23%. The risk-free rate is 3.5%. What is the expected return on the market portfolio?
2. You are designing a risky portfolio based on two stocks, A and B. A has expected return of 15% and standard deviation of return 20%. B has expected return of 20% and standard deviation of return 10%. The correlation coefficient between A and B is 0.5. The risky free rate of return is 8%. The proportion of the optimal risky portfolio that should be invested in A is?

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