The following table has expected returns and variance-covariance of five stocks. The T-Bill rate is 3. Variance-Covariance Returns V F GM WMT Y V 27.226 588.659 -275.078 -319.948 -36.805 -93.170 F 11.653 -275.078 5716.621 22.772 56.588 52.187 GM 4.633 -319.948 22.772 729.510 569.730 -258.506 WMT 12.905 -36.805 56.588 569.730 932.361 367.376 Y 6.908 -93.170 52.187 -258.506 367.376 1466.966 T-Bill 3.000 questions a) determine the Tangency portfolio weights and calculate its expected return, standard deviation and Sharpe Ratio. Assume short sales are allowed. Write the equation of risk-return relations. b) determine the Tangency portfolio and calculate its expected return, standard deviation and Sharpe Ratio assuming NO SHORT SALE. c) Creat a portfolio G from these stocks that has 20% rate of return. What is the Sharpe Ratio of portfolio G?
The following table has expected returns and variance-covariance of five stocks. The T-Bill rate is 3. Variance-Covariance Returns V F GM WMT Y V 27.226 588.659 -275.078 -319.948 -36.805 -93.170 F 11.653 -275.078 5716.621 22.772 56.588 52.187 GM 4.633 -319.948 22.772 729.510 569.730 -258.506 WMT 12.905 -36.805 56.588 569.730 932.361 367.376 Y 6.908 -93.170 52.187 -258.506 367.376 1466.966 T-Bill 3.000 questions a) determine the Tangency portfolio weights and calculate its expected return, standard deviation and Sharpe Ratio. Assume short sales are allowed. Write the equation of risk-return relations. b) determine the Tangency portfolio and calculate its expected return, standard deviation and Sharpe Ratio assuming NO SHORT SALE. c) Creat a portfolio G from these stocks that has 20% rate of return. What is the Sharpe Ratio of portfolio G?
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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Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
| The following table has expected returns and variance-covariance of five stocks. | ||||||||||||
| The T-Bill rate is 3. | ||||||||||||
| Variance-Covariance | ||||||||||||
| Returns | V | F | GM | WMT | Y | |||||||
| V | 27.226 | 588.659 | -275.078 | -319.948 | -36.805 | -93.170 | ||||||
| F | 11.653 | -275.078 | 5716.621 | 22.772 | 56.588 | 52.187 | ||||||
| GM | 4.633 | -319.948 | 22.772 | 729.510 | 569.730 | -258.506 | ||||||
| WMT | 12.905 | -36.805 | 56.588 | 569.730 | 932.361 | 367.376 | ||||||
| Y | 6.908 | -93.170 | 52.187 | -258.506 | 367.376 | 1466.966 | ||||||
| T-Bill | 3.000 | |||||||||||
| questions | ||||||||||||
| a) determine the Tangency portfolio weights and calculate its expected return, standard deviation and Sharpe Ratio. Assume short sales are allowed. | ||||||||||||
| Write the equation of risk-return relations. | ||||||||||||
| b) determine the Tangency portfolio and calculate its expected return, standard deviation and Sharpe Ratio assuming NO SHORT SALE. | ||||||||||||
| c) Creat a portfolio G from these stocks that has 20% |
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