Rachel is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 of Share A, S7,600 of Share B, $14,700 of Share C, and s5,500 of Share D. Required: 1. Compute the weights of the assets in Rachel's portfolio? 1. If Rachel's portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the past four years, respectively. Calculate the geometric average return of the portfolio for this period. 1. Assume that expected return of the stock A in Rachel's portfolio is 13.6% this year. The risk premium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflation rate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model (CAPM). 1. d) Following is forecast for economic situation and Rachel's portfolio returns next year, calculate the expected return, variance and standard deviation of the portfolio. State of economy Probability Rate of returns Mild Recession 0.35 - 5% Growth 0.45 15% Strong Growth 0.20 30%
Rachel is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 of Share A, S7,600 of Share B, $14,700 of Share C, and s5,500 of Share D. Required: 1. Compute the weights of the assets in Rachel's portfolio? 1. If Rachel's portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the past four years, respectively. Calculate the geometric average return of the portfolio for this period. 1. Assume that expected return of the stock A in Rachel's portfolio is 13.6% this year. The risk premium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflation rate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model (CAPM). 1. d) Following is forecast for economic situation and Rachel's portfolio returns next year, calculate the expected return, variance and standard deviation of the portfolio. State of economy Probability Rate of returns Mild Recession 0.35 - 5% Growth 0.45 15% Strong Growth 0.20 30%
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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Transcribed Image Text:Rachel is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 of Share A,
S7,600 of Share B, $14,700 of Share C, and s5,500 of Share D.
Required:
1. Compute the weights of the assets in Rachel's portfolio?
1. If Rachel's portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the past four years, respectively. Calculate the geometric
average return of the portfolio for this period.
1. Assume that expected return of the stock A in Rachel's portfolio is 13.6% this year. The risk premium on the stocks of the same industry are 4.8%,
betas of these stocks is 1.5 and the inflation rate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model (CAPM).
1. d) Following is forecast for economic situation and Rachel's portfolio returns next year, calculate the expected return, variance and standard
deviation of the portfolio.
State of economy Probability Rate of returns Mild Recession 0.35 - 5% Growth 0.45 15%
Strong Growth 0.20 30%
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