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 A Market B) A Market C) Expected Standard Portfolio Return Deviation 23% 18% Expected Return Beta 20% 1.1 20% 1.0 A Market Expected Portfolio Return Beta 1.1 1.0 11% 19% 23% 18%

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 A Market B) A Market C) Expected Standard Portfolio Return Deviation 23% 18% Expected Return Beta 20% 1.1 20% 1.0 A Market Expected Portfolio Return Beta 1.1 1.0 11% 19% 23% 18%

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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Please answer asap Suppose you create a minimum-variance portfolio by combining two perfectly negatively correlated stocks, CRT and DMV. The expected return is 20% on CRT and 10% on DMV. The standard deviation is 20% for CRT and 15% for DMV. What is the standard deviation of your portfolio? A. 0.14 B. 0.16 C. 0.01 D. 0.12
Consider the following two portfolios. Portfolio A has an expected return of 9%, a standard deviation of returns is 32%, and a beta of 1.5. Portfolio B has an expected return of 7.5%. The risk-free rate is 3%. Assuming the CAPM holds, and Portfolio A and B are fairly priced, then Portfolio B has a beta of? a. 0.61 ○ b. 0.98 ○ c. 1.13 ○ d. 1.09 ○ e. 1.18
Consider the following information: Portfolio Expected Return Beta Risk-free 5% 0 Market 12.4 1.0 A 10.4 1.7 Required: a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.7. (Round your answer to 2 decimal places.) b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) c. If the simple CAPM is valid, is the situation above possible?
The following expected return and the standard deviation of current returns are known: Security (i) Expected Return Standard Deviation βi A 0.20 0.12 1.1 B 0.12 0.10 0.8T-Bills 0.05 0 0Market Portfolio 0.20 0.15 1 a) Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and the market portfolio. b) Determine which of A or B is over-valued or undervalued. c) How will you invest $1000 in riskless T-bills and the risky assets in the Market Portfolio to maintain a standard deviation of 10%. Pls show procedure, thanks
If the market portfolio has a required return of 0.12 and a standard deviation of 0.40, and the risk-free rate is 0.04, what is the slope of the security market line?
Based on the hypothetical portfolios provided in the table below, which of the portfolios would lie on the Efficient Frontier? Portfolio Expected Return Risk A B с D E 4% 6% 8% 8% 10% 3% 3% 5% 8% 12%
Find the tangency portfolio mathematically (or mean-variance efficient portfolio). Follow the next steps): (look picture)
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
For a market timer, the ________ will be higher when the market risk premium is higher Select one: a. portfolio’s idiosyncratic risk b. portfolio’s standard deviation c. portfolio’s beta d. security selection component of the portfolio e. portfolio’s alpha
Consider two well-diversified portfolios: Portfolio 1 has an expected return of 8% and a beta of 0.80 while Portfolio 2 has an expected return of 13% and a beta of 1.50. If the risk-free rate is 1.5%, which portfolio would a rational risk-averse investor prefer and why? O A. Portfolio 2 because it has the higher reward to risk ratio. O B. Portfolio 1 because it has the higher reward to risk ratio. OC. Portfolio 2 because it has the higher reward. O D. Portfolio 1 because it has the lower risk.
6. Consider an optimal risky portfolio with expected return of 8% and standard deviation of 26% and a risk-free rate of 4%, what is the slope of the best feasible Capital Allocation Line (CAL)? a. 0.12 b. 0.15 c. 0.31 d. 0.46
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