The expected return on a portfolio is 14%, and that the returns have a standard deviation of 10%. Also, the returns are approximately normally distributed. What would be the 1% "value at risk" (VaR) for this portfolio, if the size of the portfolio is $1 million? O $372,500 O $225,500 O $24,500 O $92,500 4

The expected return on a portfolio is 14%, and that the returns have a standard deviation of 10%. Also, the returns are approximately normally distributed. What would be the 1% "value at risk" (VaR) for this portfolio, if the size of the portfolio is $1 million? O $372,500 O $225,500 O $24,500 O $92,500 4

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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The market risk premium (E[Rm]-Rf) is 6%. The risk-free rate (Rf ) is 2%. Asset X has beta equal to 0.8 and expected return equal to 7%. Asset Y has beta equal to 1 and expected return equal to 7.5%. What level of abnormal return can be expected from a 1:1 long-short portfolio of X and Y? a. 0.7% b. 0.6% c. 0.5% d. 0.4% e. None of the above
Suppose that you currently have $100,000 invested in a portfolio with an expected return of 13% and a volatility of 8%. The efficient (tangent) portfolio has an expected return of 17% and a volatility of 10%. The risk-free rate of interest is 1%. Suppose that you want to keep the expected return equal to the current rate of 13%. Accordingly, the level of risk you can expect is: 1.00% 3.75% 4.75% 5.15% None of the above
State the return rate (in %) for your optimal portfolio.
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HNL has an expected return of 18% and KOA has an expected return of 22%. If you create a portfolio that is 60% HNL and 40% KOA, what is the expected return of the portfolio? The expected return of the portfolio is%. (Round to two decimal places.) F10 F1 Insert Home Backspace Up %23 6 3 Pac De Delete End Y Enter J K D F G Shift V B
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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?
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The gamma of a delta-neutral portfolio is 500. What is the impact (gain/loss and amount) of a jump of $3 in the price of the underlying asset?
5. Suppose that you currently have $250,000 invested in a portfolio with an expected return of 12% and a volatility of 10%. At the same time the efficient (tangent) portfolio has an expected return of 17% and a volatility of 12%. The risk- free rate of interest is 5%. The Sharpe ratio for your portfolio is closest to: A) 1.2. B) 0.6. C) 1.0. D) 0.7.
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