Risk - free rate: 4%, market premium: 7.5%, standard deviation of the market portfolio: 0.2. Covariance betwee Google and market: 0.048. Covariance between Boeing and market: 0.052 Portfolio composition: Google 30%, 70%. The expected return of the portfolio is inquired. Expected return of the portfolio? Special Note: In problen nature, the typical scenario involves providing the expected return of the market. However, in this particular prob market premium (expected return of the market risk - free rate) was given. It is crucial to note that when apply values based on the given information, using the expected return of the market instead of the market premium lead to an incorrect answer

Risk - free rate: 4%, market premium: 7.5%, standard deviation of the market portfolio: 0.2. Covariance betwee Google and market: 0.048. Covariance between Boeing and market: 0.052 Portfolio composition: Google 30%, 70%. The expected return of the portfolio is inquired. Expected return of the portfolio? Special Note: In problen nature, the typical scenario involves providing the expected return of the market. However, in this particular prob market premium (expected return of the market risk - free rate) was given. It is crucial to note that when apply values based on the given information, using the expected return of the market instead of the market premium lead to an incorrect answer

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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Based on the hypothetical portfolios provided in the table below, which of the portfolios would lie on the Efficient Frontier? Portfolio Expected Return Risk A B с D E 4% 6% 8% 8% 10% 3% 3% 5% 8% 12%
Calculate the expected return from the following security using the CAPM Capital Asset Pricing Model: Standard Deviation of Security = 0.18 Standard Deviation of Market Portfolio = 0.10 Expected Return on Market Portfolio = 0.09 Correlation between possible Returns for the Security and the Market Portfolio = 0.70. Expected Risk Free Rate = 0.03
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Portfolio manager wants to optimize the riskiness of the two assets portfolio with the given statistics below:- Assets Return Volatility Weight A 17.00% 15.00% 40.00% B 21.00% 25.00% 60.00% Correlation -0.70 -0.35 0.25 0.50 0.70 Requirements Calculate the two assets portfolio standard deviation at different correlation levels which are mentioned above and suggest at which correlation is best suits to your portfolio.
Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rƒ. The characteristics of two of the stocks are as follows: Stock Expected Return Standard Deviation A 8% 55% B 4% 45% Correlation = −1 Required: a. Calculate the expected rate of return on this risk-free portfolio? (Hint: Can a particular stock portfolio be formed to create a “synthetic” risk-free asset?) (Round your answer to 2 decimal places.) b. Could the equilibrium rƒ be greater than rate of return?
‘An investor purchased the following five bonds. Each bond had a par value of $1,000 and a 11% yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell, and each then had a new YTM of 7%, What is thepercentage change in price for each bond after the decline in interest rates? Fill in the following table. Enter all amounts as positive numbers. Do not round intermediate calculations. Round your monetary answers to the nearest cent and percentage answers totwo decimal places. Price @ 11% Price @ 7% Percentage Change10-year, 10% annual coupon $ $ %10-year zeroS-year zero 30-year zero$100 perpetuity
(Capital Asset Pricing Model) The expected return for the general market is 10.5 percent, and the risk premium in the market is 6.8 percent. Tasaco, LBM, and Exxos have betas of 0.809, 0.677, and 0.578, respectively. What are the appropriate expected rates of return for the three securities? Question content area bottom Part 1 The appropriate expected return of Tasaco is enter your response here%. (Round to two decimal places.) Part 2 The appropriate expected return of LBM is enter your response here%. (Round to two decimal places.) Part 3 The appropriate expected return of Exxos is enter your response here%. (Round to two decimal places.)
Suppose a portfolio is given as follows: Investment Name ABC Corn Mill X-Treme Manufacturing b.) 3.6% Ob.) none listed a.) none listed a.) 4.5% a.) 4% b.) 4% b.) 3.4% Weight a.) 5% 0.4 0.6 a.) What is the expected return of the portfolio? b.) What is the standard deviation of the portfolio if the correlation is +0.4? Select the most appropriate responses below for parts a.) and b.). Expected Return 2% 7% Standard Deviation 2% 5%
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(c)) Discuss the following graphic, which shows the relationship between expected return and portfolio weights. The portfolio is comprised of a debt security D and an equity security E. What would the portfolio strategy be when Wp = 2 and ba WE = -1? 38 (33) -0.5 Expected Return 13% 8% Debt Fund 0 (ebenso) esenicut adol leu@ ledol (loorba (ognerloxel) Ismet tametnl Equity Fund 1.0 0 OC) becida nieu to 2.0 w (stocks) AB -1.0 68 XO.YOUTS RO w (bonds)=1-w (stocks) 15 V10 anollesup Figure 7.3 Portfolio expected return as a function of investment proportions la 21101TO
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%)

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