Pound money has invested 150 percent of his money in an index fund that invests in all shares on the stock exchange. The risk free interest rate is 5percent and all investors can borrow and lend unlimited amounts at this rate. The expected return on the market index is 15% with a standard deviation of 20 percent. a.How can Mr. Pound-money invest more than 100 percent of his money in the index fund? b. Is Mr. Pound-money portfolio mean variance efficient? c. What is the portfolio standard Deviation? d. What is the portfolio β (relative to market as a whole)
Pound money has invested 150 percent of his money in an index fund that invests in all shares on the stock exchange. The risk free interest rate is 5percent and all investors can borrow and lend unlimited amounts at this rate. The expected return on the market index is 15% with a standard deviation of 20 percent. a.How can Mr. Pound-money invest more than 100 percent of his money in the index fund? b. Is Mr. Pound-money portfolio mean variance efficient? c. What is the portfolio standard Deviation? d. What is the portfolio β (relative to market as a whole)
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
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- Pound money has invested 150 percent of his money in an index fund that invests in all shares on the stock exchange. The risk free interest rate is 5percent and all investors can borrow and lend unlimited amounts at this rate. The expected return on the market index is 15% with a standard deviation of 20 percent.
a.How can Mr. Pound-money invest more than 100 percent of his money in the index fund?
b. Is Mr. Pound-money portfolio mean variance efficient?
c. What is the portfolio standard Deviation?
d. What is the portfolio β (relative to market as a whole)
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