The following estimates are for two risky assets A and B, and one risk free asset C.AReturn(r)6%5%1%SD(0)Cov(RA, RB)=0.0021) What is the optimal weight of the risk portfolio. (that consists of A and B)?2) Compute the expected return and standard deviation (SD) of the optimal riskportfolio. (%:Round to the third dec3) Given that U=E(r)-10o?, what is the optimal weight of C (when we construct theoptimal portfolio using A, B and C)?10%6%0%mal place)

Answered: Image /qna-images/answer/aeb6d7a3-d4f4-4749-9ad4-deb581059ce6.jpg

Answered: The following estimates are for two…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Suppose that the borrowing rate that your client faces is 9%. Assume that the equity market index has an expected return of 13% and standard deviation of 25%, that rf = 5%. Your fund manages a risky portfolio, with the following details: E(rp) = 11%, p = 15%. What is the largest percentage fee that a client currently lending (y 1)? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 1 decimal place.) y 1
A. Calculate the expected cost of hsinf each antibiotic B. To minimize the total expected cost, which antibiotic should be chose
The following information relate to the two: Projects A and B of Augustina's Co.Ltd. State of the Economy Probability Returns of A (%) Returns of B (%) Boom Normal Recession 0.4 0.3 0.3 20 15 10 9 12 18 A. Calculate the expected return and standard deviation of Projects A and B B. If project A and B are combined in the ratio 6:4, what is the expected return and standard deviation of the portfolio
Example 10: P and Q two securities, with expected returns of 15% and 24% respectively, and standard deviation of 35% and 52% respectively. Calculate the standard deviation of a portfolio weighted equally between the two securities if their correlation is -0.9.
A toll bridge charges $1.00 for passenger cars and $2.75 for other vehicles. Suppose that during daytime hours, 65% of all vehicles are passenger cars. If 20 vehicles cross the bridge during a particular daytime period, what is the resulting expected toll revenue? [Hint: Let X = the number of passenger cars; then the toll revenue h(X) is a linear function of X.]
The following information relate to the two: Projects A and B of Augustina’s Co.Ltd. State of the Economy Probability Returns of A (%) Returns of B (%) Boom 0.4 20 9 Normal 0.3 15 12 Recession 0.3 10 18 1.Calculate the expected return and standard deviation of Projects A and B 2.If project A and B are combined in the ratio 6:4 , what is the expected return and standard deviation of the portfolio
17. A risk manager would like to simulate the price of a stock using the discretized GBM, where St+At = St + µS{At+√Ã£$£€ where μ and o denote, respectively, the stock annual mean return and annual volatility. The data suggest that the weekly mean return on the stock is 0.5% and the weekly volatility is 4%. Assuming a weekly time step of At = 1/52 (in terms of annual units), what is the appropriate estimate of μ? (a) = 26.4% (b) û = 30.16% (c) û = 4.5% (d) û = 17.94% 18. Suppose that the price of an asset obeys geometric Brownian motion (GBM) with an annual drift μ = 0.01 and an annual volatility of o= 0.25. If today's price is $100, what is the probability that the price two years from now will drop below $80? Hint: Recall that under GBM, the future price at T, i.e. ST, given today's spot price, St, is with TT-t and €~ = (a) 21.51% (b) 35.48% (c) 51.1% (d) 30.47% ST= St x exp (μ x exp [(μ-27 ) XT + √F X 0 Xe] N (0, 1).
Consider the rate of return of stocks ABC and XYZ. Year 1 2 SAWN T 3 4 5 FABC 24% 10 17 4 1 ABC XYZ a. Calculate the arithmetic average return on these stocks over the sample period. (Round your answers to 2 decimal places.) rxyz 34% 12 18 1 -9 Arithmetic Average ABC XYZ % % b. Which stock has greater dispersion around the mean return?
2
Consider the two (excess return) index-model regression results for stocks A and B. The risk- free rate over the period was 6%, and the market's average return was 14%. Performance is measured using an index model regression on excess returns. (look at the attached image) Calculate: a. Jensen’s alpha. b. Sharpe measure. c. Treynor measure.
Q 3: Al Matra LLC has recently hired Mr. Musab, a professional market researcher. Mr. Musab is interested to find out relationship between cost incurred and revenue earned by the company. He collected the data of last 7 years from the accounts department, but he is confused about the method which can find out the relationship. Revenue Cost Incurred Earned Year (OMR in (OMR in Millions) Millions) 2013 20 2014 10 22 2015 9 22 2016 18 2017 11 20 2018 12 24 2019 10 25 a) Find out the correlation value and give interpretation of the result b) If correlation value is 1.25, discuss the result analytically.
In finance, one example of a derivative is a financial asset whose value is determined (derived) from a bundle of various assets, such as mortgages. Suppose a randomly selected mortgage in a certain bundle has a probability of 0.04 of default. Complete parts a to d below. (a) What is the probability that a randomly selected mortgage will not default (that is, pay off)? The probability is (Type an integer or a decimal. Do not round.) (b) What is the probability that a bundle of five randomly selected mortgages will not default assuming the likelihood any one mortgage being paid off is independent of the others? Note: A derivative might be an investment that only pays when all five mortgages do not default. The probability is (Round to four decimal places as needed.) (c) What is the probability that the derivative from part (b) becomes worthless? That is, at least one of the mortgages defaults. The probability is. (Round to four decimal places as needed.) (d) In part (b), we made the…

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