Consider the information on the market, the risk-free asset, and a mutual fund. You want to build a two-asset portfolio comprising the market portfolio and the risk-free asset such that your portfolio beta is the same as the mutual fund. What is the portfolio weight on the market in your portfolio? Mutual Fund Market Risk Free E(k) 11.1% 8.5% 2.0% Beta 1.4 1 0

Consider the information on the market, the risk-free asset, and a mutual fund. You want to build a two-asset portfolio comprising the market portfolio and the risk-free asset such that your portfolio beta is the same as the mutual fund. What is the portfolio weight on the market in your portfolio? Mutual Fund Market Risk Free E(k) 11.1% 8.5% 2.0% Beta 1.4 1 0

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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(c)) Discuss the following graphic, which shows the relationship between expected return and portfolio weights. The portfolio is comprised of a debt security D and an equity security E. What would the portfolio strategy be when Wp = 2 and ba WE = -1? 38 (33) -0.5 Expected Return 13% 8% Debt Fund 0 (ebenso) esenicut adol leu@ ledol (loorba (ognerloxel) Ismet tametnl Equity Fund 1.0 0 OC) becida nieu to 2.0 w (stocks) AB -1.0 68 XO.YOUTS RO w (bonds)=1-w (stocks) 15 V10 anollesup Figure 7.3 Portfolio expected return as a function of investment proportions la 21101TO
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An insurance fund is analysing the performance of three different fund managers A, B and C. Each manager invests in one third of all asset classes to maintain a well diversified portfolio. The following information is available: A B C Market portfolio Average net return (%) 5 8 9 9 Volatility (%) 18 24 21 20 Beta 0.8 1.1 1.3 A risk free rate is established to be 2%. Calculate for each of the fund managers the expected return using CAPM, ex post Sharpe Ratio, Treynor Ratio, M2 alpha and Jensen’s alpha. Interpret your results.
Consider a capital market with two securities. The payoffs of these securities in the two equally likely states of the world are given in the table below. Payoff Price Security A в State 1 State 2 PA = 2 Pg = 3 4 2 3 4 a) Discuss the concepts of complete capital markets, pure (Arrow-Debreu) securities, and pure factor portfolios. Establish whether the capital market in this case is complete and determine the prices of the pure securities by arbitrage.
Given a simple world with two assets, a bond fund and a stock fund, clearly detail the steps involved in arriving at the 1) efficient frontier, and 2) market (optimal) portfolio.
After learning the course, you divide your portfolio into three equal parts (i.e., equal market value weights), with one part in Treasury bills, one part in a market index, and one part in a mutual fund with beta of 1.11. What is the beta of your overall portfolio?
A second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must be less than or equal to some specified amount. Consider the Hauck Financial Service data. Click on the datafile logo to reference the data. Annual Return (%) Mutual Fund Year 1 Year 2 Year 3 Year 4 Year 5 Foreign Stock 10.06 13.12 13.47 45.42 -21.93 Intermediate-Term Bond 17.64 3.25 7.51 -1.33 7.36 Large-Cap Growth 32.41 18.71 33.28 41.46 -23.26 Large-Cap Value 32.36 20.61 12.93 7.06 -5.37 Small-Cap Growth 33.44 19.40 3.85 58.68 -9.02 Small-Cap Value 24.56 25.32 -6.70 5.43 17.31 (a) Construct this version of the Markowitz model for a maximum variance of 38. Let: FS = proportion of portfolio invested in the foreign stock mutual fund IB = proportion of portfolio invested in the intermediate-term bond fund LG = proportion of portfolio invested in the large-cap growth fund LV = proportion of portfolio invested in the large-cap value fund SG =…
Hedge fund incentive fees are essentially Multiple Choice A straddles. B put options on the portfolio with a strike price equal to the expected future portfolio value. C call options on the portfolio with a strike price equal to the expected future portfolio value. D call options on the portfolio with a strike price equal to the current portfolio value times one plus the benchmark return. Only typed answer and don't use chat gpt
After learning the course, you divide your portfolio into three equal parts (i.e., equal market value weights), with one part in Treasury bills, one part in a market index, and one part in a mutual fund with beta of 0.77. What is the beta of your overall portfolio?
An analyst develops the following covariance matrix of returns: Hedge Fund Hedge Fund Market Index 0.0289 0.00765 Market Index 0.00765 0.0225 Calculate the correlation of returns between the hedge fund and the market index.
Nikul

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