QUESTION 6 Suppose that at a particular instant you observe the following situation: Security A B C B₁ 0.5 1.5 1.2 ri 6% 12% 20% Show how one can design an (arbitrage) investment strategy that would result in a positive return with a zero beta (Hint: you need to buy security C by shorting securities A and R)

QUESTION 6 Suppose that at a particular instant you observe the following situation: Security A B C B₁ 0.5 1.5 1.2 ri 6% 12% 20% Show how one can design an (arbitrage) investment strategy that would result in a positive return with a zero beta (Hint: you need to buy security C by shorting securities A and R)

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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Question 6?
16. Assume the betas for securities A, B, and C are as shown here. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Security A B C .673 Beta If you have a portfolio with $30,000 invested in each of Investment A, B, and C, what is your portfolio beta? Using the portfolio beta and assuming a risk-free rate of 5%, what would you expect the return of your portfolio to be if the market earned 20.8% next year? Declined 19.6%? The beta of your portfolio is (Round to three decimal places.) The return of your portfolio to be if the market earned 20.8% is If the market earned 20.8%, the value of your portfolio is $ The return of your portfolio to be if the market declined 19.6% is If the market declined 19.6%, the value of your portfolio is $ 1.62 0.63 - 0.23 (Round to the nearest dollar.) %. (Round to two decimal places and enter as a negative number if the return decreased.) %. (Round to two decimal places and enter…
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Need help on parts 2-7 please.
7. You have been provided with the following data on three firms and the market: Security Firm A Firm B Firm C The Market The risk-free asset Fill in the missing values (i-vi) in the table. Oi 0.12 [ii] 0.24 0.10 0.01 Pi,M [i] 0.4 0.75 [iv] 0 Bi 0.90 1.10 [iii] [v] [vi]
You are considering the two securities shown below. Which of the following statements is uniquely different about Security 4 relative to Security 2? R4 R2 f 44 RM RM Only Security 4 has a positive estimated beta. Security 4 has a higher beta than Security 2. Security 4 has a higher R² than Security 2. O Only Security 4 has a positive estimated alpha.
Consider the information on the market, the risk-free asset, and a mutual fund. You want to build a two-asset portfolio comprising the market portfolio and the risk-free asset such that your portfolio beta is the same as the mutual fund. What is the portfolio weight on the market in your portfolio? Mutual Fund Market Risk Free E(k) 11.1% 8.5% 2.0% Beta 1.4 1 0
Question 3 A portfolio consisting of 5 securities could have its beta factor computed Security % of portfolio Beta factor of A B с D E 20 10 15 20 35 security 0.90 1.25 1.10 1.15 0.70 as follows: Weighted beta factor 0.180 0.125 0.165 0.230 0.245 If the risk-free rate of return is 12% and the expected return on the market is 20%. Determine the expected return of this portfolio.
Q15 The rate which considers the riskiness and available returns on the investments is known as a. Constant Dividend b. Maximum rate of return c. Minimum acceptable rate of return d. Constant Yield
Question A .Full explain this question and text typing work only We should answer our question within 2 hours takes more time then we will reduce Rating Dont ignore this line

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