Determine which portfolio allocation is closest to theBPT optimal portfolio for the investor below with thefollowing criteria. This investor plans to invest $1,000,000 and has an aspirational level of $1,050,000with a probability of 75%. She can tolerate somepotential loss in wealth but not more than $100,000 (minimum portfolio value of $900,000). Below is twopotential portfolio allocations for this scenario. SHOWYOUR WORK Layer Allocation 1 Allocation 2 Riskless59% 90% Speculative 41 % 10% Speculative PortfolioRiskless Portfolio Probability Expected Return ExpectedReturn 10% -25% 0.50% 60% 12% 30% 50%

Allocation 1 and Allocation 2 were analyzed to determine which is closer to the optimal portfolio…

Answered: Determine which portfolio allocation is…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 7MC: Write out the equation for the Capital Market Line (CML), and draw it on the graph. Interpret the...

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Give typing answer with explanation and conclusion Assume that your client would prefer to invest her entire wealth into a portfolio with an annual risk premium of 6% and a standard deviation of 12%. You have constructed a risky portfolio with an expected return of 10% and a standard deviation of 15%. T-Bills are currently yielding 4%. What is the optimal allocation, y, to the risky portfolio given your client's risk preferences? What is the expected return and standard deviation on your client's optimal complete portfolio?
Consider the following information about a risky portfolio that youmanage, and a risk-free asset: E(rP ) = 11%, σP = 15%, rf = 5%.a) Your client wants to invest a proportion of her total investment budget in your riskyfund to provide an expected rate of return on her overall or complete portfolio equal to8%. What proportion should she invest in the risky portfolio, P, and what proportionin the risk-free asset? b) What will be the standard deviation of the rate of return on her portfolio? c) Another client wants the highest return possible subject to the constraint that you limithis standard deviation to be no more than 12%. Which client is more risk averse?
d. Calculate the portfolio return for each alternative.e. Calculatethe portfolio standard deviation for each f. Based on the answer in d) and e), which alternatives is the best for Aisyah to choose? Justify your answer.Note: No need excle formula and d no question answer .i just need e,f no question no answer. thank you sir
Suppose Taneal is considering combining the two portfolios into a single portfolio. If she invests 60% in Portfolio A and 40% in Portfolio B: i. Determine the return of the new portfolio ii. If the standard deviation for portfolio B was 19%, comment on the risk of the new portfolio, supported with calculations. iii. Should Taneal combine these two portfolios? Why?
Find the expected portfolio return and standard deviation if you were to invest 50% of your portfolio in Asset B, 50% in Asset C, with no allocation to Asset A. Compute your answers to the nearest tenth of a basis point. (See attached data file) We know that Asset A: B: C: expected return: 1.16 1.35 1.38 expected standard deviation: 2.88 1.58 2.19
Suppose you are considering investing your entire portfolio in three assets A, B and C. You expect that after you invest, four possible mutually exclusive scenarios will occur, with associated returns (in %) for each of the three assets as listed below. The probability of each scenario is given below (Attached image). Find the expected returns and standard deviations of Asset A, B & C. (HINT: the expected return is given by the probability-weighted sum of returns in each scenario. The expected standard deviation is given by the square root of the probability-weighted sum of squared deviations from the expected return.) Is there any reason to invest in Asset A given its low expected return and high standard deviation?
c) Suppose Taneal is considering combining the two portfolios into a single portfolio. Ifshe invests 60% in Portfolio A and 40% in Portfolio B:i. Determine the return of the new portfolio ii. If the standard deviation for portfolio B was 19%, comment on the risk of the new portfolio, supported with calculations.iii. Should Taneal combine these two portfolios? Why
You can invest in a portfolio of two assets: the riskfree asset with rate of return 6%, and a risky portfolio with expcected return 16% and stdev 30%. You optimally choose to invest equal amount in both assets. What is your risk aversion (keep 2 decimal places)? A=
An investor is trying to decide between Portfolio ST and Portfolio BT. Portfolio ST comprises of stocksfrom the tech, financial and construction industry, while Portfolio BT includes stock from tech and financial industries only. The table below contains information on both portfolios. Which portfolio is the optimal portfolio considering the threshold level? Why do you think portfolio BT has a higher standard deviation than portfolio ST?
(Portfolio VaR) Suppose there are two investments A and B. Either investment A or B has a 4.5% chance of a loss of $15 million, a 2% chance of a loss of $2 million, and a 93.5% change of a profit of $2 million. The outcomes of these two investments are independent of each other.
Return on a portfolio may be roughly categorized into three levels: high, medium, and low. If the return is high (0.3), an investor is expected to have a total return of $300,000. if the return is medium (0.5), the investor is expected to have $100,000 in return. if the return is low (0.2), the investor is expected to lose $100,000. Alternatively, the investor can invest in treasury bonds and have a guaranteed return of $150,000. The investor is considering to hire a financial adviser, who can provide information about the market and help reduce risk. The adviser has suggested that the return on the portfolio would be a tossup, i.e., 50% of chance with a high return and 50% of chance with a low return. The table below summarizes the financial adviser's past performance. Should the investor hire the financial adviser? Return on the Portfolio Medium 0.4 0.6 Financial Adviser Judgement High Low High 0.6 0 Low 0 0.4
The optimal proportion of the risky asset in the complete portfolio is given by the equation below y*= E(Rp− Rf) A0² For each of the variables on the right side of the equation, discuss the impact of the variable's effect on y* and why the nature of the relationship makes sense intuitively. Assume the investor is risk averse

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