A risk-averse Investor is Interested to know the Sharpe ratio of the portfollo to make an Investment decision. The expected return of the portfolio is 15%. The return on the risk-free Investment is 2.5%. The prevailing expected market return is 10% while the portfolio standard deviation is 5%.Calculate the Sharpe ratio of the Investment.The Sharpe ratio is 1.5.The Sharpe ratio is 2.5.The Sharpe ratio is 0.07.The Sharpe ratio is 3.

Risk-free rate = 2.5%Portfolio standard deviation = 5% Market return = 10%Portfolio' expected return…

risk-averse investor is interested to know the Sharpe ratio of the portfolio to make an investment decision. The expected return of the portiolo is 15%. The return on the nsk-free investment is Calculate the Sharpe ratio of the investment The Sharpe ratio is 15 The Sharpe ratio is 25 The Sharpe ratio is 0.07 The prevailing expected market retum is 10% while the portfolio standard de

risk-averse investor is interested to know the Sharpe ratio of the portfolio to make an investment decision. The expected return of the portiolo is 15%. The return on the nsk-free investment is Calculate the Sharpe ratio of the investment The Sharpe ratio is 15 The Sharpe ratio is 25 The Sharpe ratio is 0.07 The prevailing expected market retum is 10% while the portfolio standard de

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

See similar textbooks

Similar questions

need help
The risk-free rate is currently 3.3%, and the market return is 14.8%. Assume you are considering the following investments: Investment Beta A 1.54 B 1.16 C 0.51 D 0.11 E 2.14 . a. Which investment is most risky? Least risky? b. Use the capital asset pricing model (CAPM) to find the required return on each of the investments. c. Find the security market line (SML), using your findings in part b. d. On the basis of your findings in part c, what relationship exists between risk and return? Explain.
Risk-free rate is 7%, expected return on the market portfolio is 12%. Identify the correct equation for Security Market Line (SML): a. r = 5% + b(7%) b. r = 7% + b (12%) c. r = 7% + b (5%) d. r = 5% + b (12%)
Assume CAPM holds. What is the correlation between an efficient portfolio and market portfolio? a. 1 b.-1 c.0 d. Not enough information Assume CAPM holds. The risk-free rate is 1% and the expected return on the portfolio is 5%. What is the expected return of a stock with a beta of 2? 70%
Consider the single factor APT. Portfolio A has a beta of 1.5 and an expected return of 20 %. Portfolio B has a beta of 0.7 and an expected return of 16%. The risk - free rate of return is 8%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio and a long position in portfolio
Calculate the required rate of return for an asset that has a beta of 1.01, given a risk-free rate of %3.4 and a market return of %9.1 . b. If investors have become more risk-averse due to recent geopolitical events, and the market return rises to %11.6, what is the required rate of return for the same asset? a. The required rate of return for the asset is enter your response here%. (Round to two decimal places.) Part 2 b. If investors have become more risk-averse due to recent geopolitical events, and the market return rises to 11.6%, the required rate of return for the same asset is enter your response here%. (Round to two decimal places.)
Asset X has an expected return of 10% and volatility of 10% . If its Sharpe Ratio is 0.60, what is the risk-free rate?
Consider an economy with a (net) risk-free return r1 = 0:1 and a market portfolio with normally distributed return, with ErM = 0:2 and 2M = 0:02. Suppose investor A has CARA preferences, with risk aversion coe¢ cient equal to 1 and an endowment of 10. a) Write down the maximization problem for the investor. b) Determine the amount invested in the risky portfolio and in the risk-free asset. c) Suppose another investor (B) has a coe¢ cient of absolute risk aversion equal to 2 (and the same endowment 10). Compute his optimal portfolio and compare it to that of investor A. Explain the di§erent results for investors A and B. d) Finally, consider Investor C with mean-variance preferences Ec V ar(c) (and endowment 10). Compute his optimal portfolio and compare it to that of investors A and B (as obtained in questions b and c). Compare your result with those obtained for investors A and B.
If the beta of Asset A is 2.2, the risk free rate is 2.5%, and the expected return on Asset A is 8%, what is the expected return on the market (Note: you want to use CAPM)? Group of answer choices 7.28% 5.00% 8.00% 16.80%
In an economy where the Capital Asset Pricing Model(CAPM) holds, the riskfree interest rate is 1%. The expected return of the market portfolio is 16% and its standard deviation is 20%. Suppose there is a portfolio with expected return of 25%. What should be its standard deviation? Select one: a.31.25% b.30% c.32% d. Insufficient information to determine the answer.
You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 34%. The T-bill rate is 4%. Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolio's standard deviation will not exceed 10%. Required: a. What is the investment proportion, y? b. What is the expected rate of return on the complete portfolio?
the CAPM world, the average investor’s risk aversion parameter is 2 and the standard deviation of the market portfolio is 23%. The risk-free rate is 3.5%. What is the expected return on the market portfolio?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS