Question 10 Save Answer Your portfolio allocates equal funds to the DW Co. and Woodpecker, Inc.. DW Co. stock has an annual return mean and standard deviation of 12 percent and 30 percent, respectively. Woodpecker, Inc., stock has an annual return mean and standard deviation of 20 percent and 4242 percent, respectively. The return correlation between DW Co. and Woodpecker, Inc., is zero. What is the smallest expected loss for your portfolio in the coming month with a probability of 2.5 percent?

Page QUESTIONS 1. What advantages do the mutual funds offer compared to the company stock? 2. Assume that you invest 5 percent of your salary and receive the full 5 percent match from S&S Air. What EAR do you earn from the match? What conclusions do you draw about matching plans? 3. Assume you decide you should invest at least part of your money in large-capitalization stocks of companies based in the United States. What are the advantages and disadvantages of choosing the Bledsoe Large-Company Stock Fund compared to the Bledsoe S&P 500 Index Fund? 4. The returns on the Bledsoe Small-Cap Fund are the most volatile of all the mutual funds offered in the 401(k) plan. Why would you ever want to invest in this fund? When you examine the expenses of the mutual funds, you will notice that this fund also has the highest expenses. Does this affect your decision to invest in this fund? 5. A measure of risk-adjusted performance that is often used is the Sharpe ratio. The Sharpe ratio is…

Your portfolio allocates equal funds to DW Co. and Woodpecker, Inc., DW Co. stock has an annual return mean and standard deviation of 9 percent and 30 percent, respectively. Woodpecker, Inc., stock has an annual return mean and standard deviation of 20 percent and 46 percent, respectively. The return correlation between DW Co. and Woodpecker, Inc., is zero. What is the smallest expected loss for your portfolio in the coming month with a probability of 16 percent? (Negative amounts should be indicated by a minus sign. Round your answer to 2 decimal places. Omit the "%" signs in your response.) Smallest expected loss. -12.81

Consider the following data:Expected Return Standard DeviationRussell Fund 16% 12%Windsor Fund 14% 10%S&P 500 Fund 12% 8%The correlation between the returns on the Russell Fund and the S&P 500 Fund is 0.7. The T-Bill rate is 6%. Which of the following portfolios would you prefer to hold in combination with T-bills and why?(a) Russell Fund(b) Windsor Fund(c) S&P 500 Fund(d) A portfolio of 60% Russell Fund and 40% S&P 500 Fund.

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Covariance with Mean Return Stock AOL Microsoft Intel AOL .002 .001 15% Microsoft .001 .002 .001 12 Intel 001 .002 10 5.2. Compute the tangency portfolio weights assuming a risk-free asset yields 5 percent.

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CAPM As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Fund T Fund U Forecasted Return CAPM Beta 1.20 0.80 9.0% 10.0 a. If the risk-free rate is 3.9 percent and the expected market risk premium (E(RM)-RFR) is 6.1 percent, calculate the required return for each mutual fund according to the CAPM. b. Using the estimated required of returns from part (a) along with your return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?