Considering the attached set of securities and portfolio returns: Assume that you initially invested $1,000,000 in the portfolio and that the distribution of the annual rate of return of the portfolio is normal. What is the distribution of the return of the portfolio 20 years after its formation? Provide the graph of the distribution of the
Considering the attached set of securities and portfolio returns: Assume that you initially invested $1,000,000 in the portfolio and that the distribution of the annual rate of return of the portfolio is normal. What is the distribution of the return of the portfolio 20 years after its formation? Provide the graph of the distribution of the
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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Question
Considering the attached set of securities and portfolio returns:
- Assume that you initially invested $1,000,000 in the portfolio and that the distribution of the annual
rate of return of the portfolio is normal.
- What is the distribution of the return of the portfolio 20 years after its formation?
- Provide the graph of the distribution of the return of the portfolio.
Transcribed Image Text:Individual Portfolio Assets
Annualized
Allocation
Mean Returns
StdDev
Sharpe Ratio
0.44
Tickers
Percentage
Name
Allocation (w)
(Volatility a)
(H)
6.24%
WMT
20.00% Walmart Inc
0.20
15.65%
KO
10.00% Coca-Cola Co
0.10
4.06%
14.89%
0.31
PFE
5.00% Pfizer Inc.
0.05
0.33%
15.33%
0.06
cvs
25.00% CVS Health Corp
0.25
7.33%
24.75%
0.32
BRK.A
40.00% Berkshire Hathaway Inc. Class A
0.40
9.53%
16.05%
0.63
Portfolio Calculations (Annualized)
Expected
StdDev
# Assets
Allocation
Sharpe Ratio
Returns
(Volatility o)
100.00%
7.32%
13.74%
0.58
Portfolio Coorelation Matrix
WMT
ко
PFE
CVs
BRK.A
WMT
1.000
0.240
0.085
0,348
0.318
ко
0.240
0.985
0.140
0.350
0.567
PFE
0.085
0.140
0.968
0.198
0.168
CVs
0.348
0.350
0.198
0.999
0.457
BRK.A
0.318
0.567
0.168
0.457
0.994
Portfolio Annualized Covariance Matrix
WMT
ко
PFE
CVs
BRK.A
WMT
0.027
0.007
0.004
0.014
0.009
ко
0.007
0.028
0.006
0.014
0.016
PFE
0.004
0.006
0.068
0.013
0.007
CVs
0.014
0.014
0.013
0.059
0.018
BRK.A
0.009
0.016
0.007
0.018
0.027
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