Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index with weights as shown below. (Er your answers as decimals rounded to 4 places. Leave no cells blank - be certain to enter "Q" wherever required.)
Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index with weights as shown below. (Er your answers as decimals rounded to 4 places. Leave no cells blank - be certain to enter "Q" wherever required.)
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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Transcribed Image Text:Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged
roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 38% per year. Assume these
values are representative of investors' expectations for future performance and that the current T-bill rate is 4%
Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index with weights as shown below. (Enter
your answers as decimals rounded to 4 places. Leave no cells blank - be certain to enter "0" wherever required.)
Wels
0.0
0,2
0.4
0.6
0.8
1.0
Windex
1.0
0.8
0.6
04
0.2
0.0
Expected Return
0.1200
Variance
0.1444 Example
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