Pick ALL the true statements about the investment opportunity set analysis? Notation: B means bonds. S means stocks. -23456781U=2215272222222 24 A E(rs) 10 B E(B) 5 с Input Data ας 19 D E Ов PBS 8 0.2 Portfolio Weights WS-1-WB WB Expected Return, Erp) Col A*A3 + Col B*B3 Std Dev (Equation 6.6) -0.2 1.2 4.0 9.59 -0.1 1.1 4.5 8.62 0.0 1.0 5.0 8.00 9 0.0932 0.9068 5.5 7.804 10 0.1 0.9 5.5 7.81 0.2 0.8 6.0 8.07 0.3 0.7 6.5 8.75 0.4 0.6 7.0 9.77 0.5 0.5 7.5 11.02 0.6 0.4 8.0 12.44 0.7 0.3 8.5 13.98 0.8 0.2 9.0 15.60 0.9 0.1 9.5 17.28 19 1.0 0.0 10.0 19.00 20 1.1 1.2 -0.1 10.5 20.75 -0.2 11.0 22.53 Notes: 1. Negative weights indicate short positions. 2. The weights of the minimum-variance portfolio are computed using the formula in Footnote 1. 1. The expected return, volatility, and correlation coefficients can be approximated from historical data. II. The spreadsheet provides an analysis of how the portfolio level retum and risk can change when the portfolio weights on stocks and bonds change. III. Row 21: bond weight is -0.2 means that the investor will need to short bonds and use the money to buy more stocks. As a result, stock weight is 1.2 (i.e., 120%). O I, II, and III OI and II only II, III only None of the three choices
Pick ALL the true statements about the investment opportunity set analysis? Notation: B means bonds. S means stocks. -23456781U=2215272222222 24 A E(rs) 10 B E(B) 5 с Input Data ας 19 D E Ов PBS 8 0.2 Portfolio Weights WS-1-WB WB Expected Return, Erp) Col A*A3 + Col B*B3 Std Dev (Equation 6.6) -0.2 1.2 4.0 9.59 -0.1 1.1 4.5 8.62 0.0 1.0 5.0 8.00 9 0.0932 0.9068 5.5 7.804 10 0.1 0.9 5.5 7.81 0.2 0.8 6.0 8.07 0.3 0.7 6.5 8.75 0.4 0.6 7.0 9.77 0.5 0.5 7.5 11.02 0.6 0.4 8.0 12.44 0.7 0.3 8.5 13.98 0.8 0.2 9.0 15.60 0.9 0.1 9.5 17.28 19 1.0 0.0 10.0 19.00 20 1.1 1.2 -0.1 10.5 20.75 -0.2 11.0 22.53 Notes: 1. Negative weights indicate short positions. 2. The weights of the minimum-variance portfolio are computed using the formula in Footnote 1. 1. The expected return, volatility, and correlation coefficients can be approximated from historical data. II. The spreadsheet provides an analysis of how the portfolio level retum and risk can change when the portfolio weights on stocks and bonds change. III. Row 21: bond weight is -0.2 means that the investor will need to short bonds and use the money to buy more stocks. As a result, stock weight is 1.2 (i.e., 120%). O I, II, and III OI and II only II, III only None of the three choices
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Pick ALL the true statements about the investment opportunity set analysis? Notation: B means bonds. S means stocks.
-23456781U=2215272222222
24
A
E(rs)
10
B
E(B)
5
с
Input Data
ας
19
D
E
Ов
PBS
8
0.2
Portfolio Weights
WS-1-WB
WB
Expected Return, Erp)
Col A*A3 + Col B*B3
Std Dev
(Equation 6.6)
-0.2
1.2
4.0
9.59
-0.1
1.1
4.5
8.62
0.0
1.0
5.0
8.00
9
0.0932
0.9068
5.5
7.804
10
0.1
0.9
5.5
7.81
0.2
0.8
6.0
8.07
0.3
0.7
6.5
8.75
0.4
0.6
7.0
9.77
0.5
0.5
7.5
11.02
0.6
0.4
8.0
12.44
0.7
0.3
8.5
13.98
0.8
0.2
9.0
15.60
0.9
0.1
9.5
17.28
19
1.0
0.0
10.0
19.00
20
1.1
1.2
-0.1
10.5
20.75
-0.2
11.0
22.53
Notes:
1. Negative weights indicate short positions.
2. The weights of the minimum-variance portfolio are computed using the formula in Footnote 1.
1. The expected return, volatility, and correlation coefficients can be approximated from historical data.
II. The spreadsheet provides an analysis of how the portfolio level retum and risk can change when the portfolio weights on stocks and bonds change.
III. Row 21: bond weight is -0.2 means that the investor will need to short bonds and use the money to buy more stocks. As a result, stock weight is 1.2 (i.e., 120%).
O I, II, and III
OI and II only
II, III only
None of the three choices
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