on this repurchase agreement. (a) You are investing GHS100,000 in an investment portfolio made up of a risky ass and a T/Bill. The expected return of the risky asset is 11% and its standard deviation is 20% The rate of return of the T/Bill is 3% (a) Compute what percentages of your funds must be invested in the risky asset and the risk-free asset so that the expected return of your investment portfolio is 8% (b) Compute what percentages of your funds must be invested in the risk-free asset and the risky asset to form a portfolio with a standard deviation of 8%.

on this repurchase agreement. (a) You are investing GHS100,000 in an investment portfolio made up of a risky ass and a T/Bill. The expected return of the risky asset is 11% and its standard deviation is 20% The rate of return of the T/Bill is 3% (a) Compute what percentages of your funds must be invested in the risky asset and the risk-free asset so that the expected return of your investment portfolio is 8% (b) Compute what percentages of your funds must be invested in the risk-free asset and the risky asset to form a portfolio with a standard deviation of 8%.

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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You invest $100 in a risky asset with an expected rate of return of 15% and a standard deviation of 15% and a T-bill with a rate of return of 5% and E (U)= E(r) - 0.5Ao. Suppose your risk aversion factor is 5. What weight would you assign to the risk-free asset? A) 0.8889. B) 0.1111. C) 0.2457. D) 0.2111. . Which of the following statements is true regarding the optimal risky portfolio: A) It is designated by the point of tangency with iso-utility curve and the capital allocation line. B) It is designated by the point of highest Sharpe ratio in the opportunity set. C) It is designed by the point of tangency with the opportunity set and the securities market line. D) This portfolio gives the highest standard deviation risk per unit of risk premium in the opportunity set.
The investor has R60,000 to invest. R15,000 will be invested into the market portfolio, R10,000 into asset A and R25,000 into asset B. The balance will be invested into the risk-free asset. The beta for asset A and asset B is 0.90 and 1.2 respectively. What is the portfolio beta? What is the correct answer? A. 0.09 B. 0.90 C. 0.91 D. 0.92
The risk-free rate is currently 3.3%, and the market return is 14.8%. Assume you are considering the following investments: Investment Beta A 1.54 B 1.16 C 0.51 D 0.11 E 2.14 . a. Which investment is most risky? Least risky? b. Use the capital asset pricing model (CAPM) to find the required return on each of the investments. c. Find the security market line (SML), using your findings in part b. d. On the basis of your findings in part c, what relationship exists between risk and return? Explain.
You have $1,000,000 to invest in a portfolio which will have the same risk as the market portfolio. Keeping this in mind, complete the following table: Table 3Asset Investment BetaStock A $200,000 0.8Stock B $100,000 1.3Stock C ______ 1.5Risk-free asset _______ _____Total investment $1,000,000 ______ Hint: Start by computing the weight for stock C
Telluride Tours is currently evaluating two mutually exclusive investments. After doing a scenario analysis and applying probabilities to each scenario, it has determined that the investments have the following distributions around the expected NPVS. Probability NPVA NPVB 10% -$39,780 -$14,918 20% -9,945 2,486 40% 19,890 19,890 20% 49,725 37,294 10% 79,560 54,698 Several members of the management team have suggested that Project A should be selected because it has a higher potential NPV. Other members have suggested that Project B appears to be more conservative and should be selected. They have asked you to resolve this question. Calculate the expected NPV for both projects. Can the question be resolved with this information alone? а. b. Calculate the variance and standard deviation of the NPVS for both projects. Which project appears to be riskier?
ou invest $1000at time t=0 and an additional $5000 at time t=1/2. At time t=1/2 you have $1300 in your account and at time t=1 you have $6100 in your account. Find the dollar-weighted rate of return rd and the time-weighted rate of return rt on this investment.
(Capital asset pricing model) Grace Corporation is considering the following investments. The current rate on Treasury bills is 2.5 percent and the expected return for the market is 9 percent. Stock Beta K 1.06 G 1.28 B 0.78 U 0.93 (Click on the icon in order to copy its contents into a spreadsheet.) a. Using the CAPM, what rates of return should Grace require for each individual security? b. How would your evaluation of the expected rates of return for Grace change if the risk-free rate were to rise to 4 percent and the market risk premium were to be only 6 percent? c. Which market risk premium scenario (from part a or b) best fits a recessionary environment? A period of economic expansion? Explain your response. Question content area bottom Part 1 a. The expected rate of return for security K, which has a beta of 1.06, is enter your response here%. (Round to two decimal places.) Part 2 The expected rate…
You are evaluating five different investments, all of which involve an upfront outlay of cash. Each investment will provide a single cash payment back to you in the future. Details of each investment appears here: Calculate the IRR of each investment. State your answer to the nearest basis point (i.e., the nearest 1/100th of 1%, such as 3.76%). The yield for investment A is The yield for investment B is The yield for investment C is The yield for investment D is The yield for investment E is %. (Round to two decimal places.) %. (Round to two decimal places.) %. (Round to two decimal places.) %. (Round to two decimal places.) %. (Round to two decimal places.) C Data table Investment A B с D E Initial Investment $1,600 $10,000 $600 $3,400 $5,200 Future Value Print $3,120 $15,775 $2,923 $4,526 $8,789 End of Year 10 11 16 Done 3 (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) 12 D X
i need your solution wit explain...
The expected return for the investment is ??? The standard deviation is ??? While the expected return for the risk-free assets, Treasury Bills, is ??? The standard deviation is ???
You have $5000 to invest for 1 year. Fund A has an estimated 4% annual return, and Fund B has an estimated 10% annual return. Fund A is more stable, and preferred among investors with low risk tolerance. Fund B is less stable, but has larger returns. Answer the following questions about this investment opportunity. 1. Suppose you have a low risk-tolerance, and you invest everything in Fund A. How much do you expect to make on your investment?Round to the nearest cent. 2. Suppose you have a medium risk-tolerance, and you want an annual return of $355. You decide to invest part in Fund A and the rest in Fund B. How much do you need to invest in Fund A?
Suppose you have $2,000 to invest. The market portfolio has an expected return of 10.5 percent and a standard deviation of 16 percent. The risk-free rate is 3.75 percent. How much should you invest in the risk-free asset if you wish to have a 15 percent return on the portfolio?

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