Efficient portfolios are complete portfolios that contain the risk-free asset and the market portfolio. You would like to hold an efficient portfolio from the set of portfolios below, include the T-bills with a beta equal to 1.5. One of the portfolios below is most likely to be the market portfolio. The risk-free rate of return is 2% annually. What is the standard deviation of this efficient portfolio? Portfolio E(R) Standard Deviation X 19% 30% Y 4% 5% Z 10% 15% W 15% 20%

Efficient portfolios are complete portfolios that contain the risk-free asset and the market portfolio. You would like to hold an efficient portfolio from the set of portfolios below, include the T-bills with a beta equal to 1.5. One of the portfolios below is most likely to be the market portfolio. The risk-free rate of return is 2% annually. What is the standard deviation of this efficient portfolio? Portfolio E(R) Standard Deviation X 19% 30% Y 4% 5% Z 10% 15% W 15% 20%

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 14P

See similar textbooks

Similar questions

If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%. A) Expected Portfolio Return. 18% 18% A Market (8) Expected Standard Portfolio Return Deviation 219 168 A Market C) Expected Portfolio Return 218 168 A Market D) Portfolio A Market Beta 1.1 1.0 Expected Return 27.14 18% 118 198 Beta 1.1 1.0 Beta 1.7 1.0
The beta on risky asset A is 1.8 and the beta on risky asset Bis 1.1. The expected return on the market portfolio is 10% and the risk free rate of return is 4%. Consider a portfolio comprising the two riskypssets and the risk-free asset where you invest 50% in risky asset A and 30% in risky asset B. What is (i) the beta of a portfolio and fi) the expected return of the portfolio? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a None of the above b. (i) 0.97 and (ii) 9.829% (1) 1.23 and (ii) 9.8296 (1) 1.23 and (ii) 11.38% ) 0.97 and (ii) 11.38% e
If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk - free rate is 5%. A) Portfolio Expected Return Beta A 15 % 1.1 Market 15 % 0.9 B) Portfolio Expected Return Standard Deviation A 18 % 11 % Market 13 % 19 % C) Portfolio Expected Return Beta A 18 % 1.1 Market 13 % 1.0 D) Portfolio Expected Return Beta A 29.0 % 2.4 Market 15 % 1.0
Use the following CAPM equation for a portfolio to answer the questions that follow:E(RP) = RF + βP (RM – RF) = 1 + 0.8 (5 – 1) = 4.2% a) Is the portfolio defensive or aggressive. Why? b) If the actual portfolio return is 6%, what is the portfolio’s alpha?
Suppose the total risk of Portfolios A, B and C are 49% ², 64%² and 100% ² respectively. The market price of risk is 8%. The Market Portfolio (M) has an expected return and a total risk of 11% and 100% respectively. (a) You want to form another Portfolio H by investing $7,000 in Portfolio A and $3,000 in Portfolio B. Compute the standard deviation of Portfolio H if the correlation coefficient between Portfolio A and Portfolio B is: i) perfectly positively correlated ii) uncorrelated iii) perfectly negatively correlated (b) If the expected return of Portfolio C is 9.4% and it is lying on the Securities Market Line, what is the beta of Portfolio C? State the answer in %². (c) Is Portfolio C a Market Portfolio as it has same level of total risk (i.e. 100% 2) as the Market Portfolio? Why or Why not?
The risk-free rate is 2%, the market risk premium is 8.00%, and portfolio A has a beta of 2. What is the required rate of return on this portfolio?
Suppose the risk free return is 6%. The beta of a managed portfolio is 1.5, the alpha is 3%, and the average return is 18%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as ___ % ?
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 13.5% бр 35.00% 12.5 30.00 7.1 20.00 10.6 4.4 25.00 0 Вр 1.55 1.20 0.80 1.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.70. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places. × Answer is complete but not entirely correct. R-squared 0.9785
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 16.00% бр 32.00% 15.00 27.00 7.30 17.00 11.30 5.80 22.00 0 Bp 1.90 1.25 0.75 1.00 0 Assume that the tracking error of Portfolio X is 13.40 percent. What is the information ratio for Portfolio X? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places. Information ratio
Assume the APT equation for portfolios A and B with the following system of equations: E[rA] = λ0 + (λ1)3 + (λ2)0.2 = 11.0 E[rB] = λ0 + (λ1)2 + (λ2)1 = 13.0 Assume the following: . The risk free rate is λ0 = Rf = 5 . The expected return on the market portfolio is RM = 10 . Expected returns are consistent with the CAPM. . (hint: note that λ1 = E[RA] − Rf and λ2 = E[RB] − Rf ). Answer the following: (a) What are λ1 and λ2? (b) What is the CAPM β associated with the pure portfolio associated with factor 1? (c) What is the CAPM β associated with the pure portfolio associated with factor 2?
Consider a portfolio exhibiting an expected return of 6% in an economy where the riskless interest rate is 1%, the expected return on the market portfolio is 10% and the standard deviation of the return to the market portfolio is 5%. Assuming that the portfolio is efficient, determine: • its beta • the standard deviation of its return • its correlation with the market return
Suppose the risk-free rate is 6 percent and the market portfolio has an expected return of 12 percent. The market portfolio has a standard deviation of 7 percent. Portfolio Z has a correlation coefficient with the market of 0.35 and standard deviation of 6 percent. According to the capital asset pricing model, what is the expected return on portfolio Z a. 12.6 percent b. 7.8 percent c. 9.87 percent d. 12.05 percent