Use the following information: ElrXOM E[TMS)=29.7%, standard deviationMS = 35.2% = 15.6%, standard deviationxOM = 15.9% Correlation of returns: PXOM.MS = 0.139, r=10% If the optimal amount to invest in the first asset (w) is 0.43, what is the variance of the risky portfolio when w=0.432 (write in decimal format using 5 decimal places)

Use the following information: ElrXOM E[TMS)=29.7%, standard deviationMS = 35.2% = 15.6%, standard deviationxOM = 15.9% Correlation of returns: PXOM.MS = 0.139, r=10% If the optimal amount to invest in the first asset (w) is 0.43, what is the variance of the risky portfolio when w=0.432 (write in decimal format using 5 decimal places)

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

An optimal risk portfolio’s expected return is 14%, standard deviation is 22%. If risk-free rate is 6%, then what would be slope of the best CAL? A) 0.64B) 0.14C) 0.08D) 0.33E) 0.36
The variance (risk) of an N-asset portfolio can be written as: o² = 2 + 2/11 -Cov where o² is the average variance of stocks in the portfolio and Cov is the average covariance between each pair of stocks in the portfolio. This result suggests that a well-diversified portfolio with a sufficiently large number of stocks will have O a zero total risk (variance) a zero covariance with other assets a zero diversifiable (nonsystematic) risk a zero market (systematic) risk
Consider the following two portfolios. Portfolio A has an expected return of 9%, a standard deviation of returns is 32%, and a beta of 1.5. Portfolio B has an expected return of 7.5%. The risk-free rate is 3%. Assuming the CAPM holds, and Portfolio A and B are fairly priced, then Portfolio B has a beta of? a. 0.61 ○ b. 0.98 ○ c. 1.13 ○ d. 1.09 ○ e. 1.18
Using the table below, calculate the Sharpe ratio of a portfolio with 80% allocated to security A and 20% allocated to security C. Assume a 3% risk-free rate. Hint: your text also calls the Sharpe ratio the reward-to- variability ratio. Time A, % В, % C, % D, % Mkt, % 1 18.56 18.23 12.82 12.43 14.48 15.27 18.24 -5.82 13.45 5.99 14.12 14.71 12.58 4.32 12.41 4. -1.57 -6.56 -7.43 -8.54 4.48 13.16 9.12 12.45 12.21 13.41 21.22 6.34 17.54 12.12 18.76 7 -3.45 -6.12 -4.62 -8.85 12.12 O 0.79 O 0.53 0.74 0.68 5. 6.
(Singular) Suppose there are two stocks that are uncorrelated. Each of these has variance of 1, and there are expected returns are 7₁ and 72, respectively. The risk-free rate is rf. Find the portfolio of weights w₁ and w2 for the Markowitz (market) portfolio. Show that for some value of rf there is no Markowitz portfolio.
. Assume that you manage a risky portfolio with an expected rate ofreturn of 18% and a standard deviation of 28%. The T-bill rate (risk-free rate) is 7%. Yourclient chooses to invest 70% in the risky portfolio in your fund and 30% in a T-bill moneymarket fund. We assume that investors use mean-variance utility: U = E(r) − 0.5 × Aσ2,where E(r) is the expected return, A is the risk aversion coefficient and σ2is the variance ofreturns.a) What is the expected value and standard deviation of the rate of return on your client’sportfolio? b) What is the reward-to-volatility ratio (Sharpe ratio) of your risky portfolio? What isthe reward-to-volatility ratio (Sharpe ratio) of your client’s risky portfolio? Commenton the relationship between these two Sharpe ratio calculated and explain the intuitionbehind. c) Draw the Capital Allocation Line (CAL) of your portfolio on an expected returnstandard deviation diagram. What is the slope of the CAL? Show the position ofyour client on your fund’s CAL.…
Please answer fast i give you upvote.
Suppose you create a portfolio with two securities: Security Security Weight (%) Security Variance (%) X 70 18 Y 30 22 If the correlation coefficient between the two securities is -0.2, what is the standard deviation of the portfolio？
Consider a long-short portfolio. Beta of this portfolio is zero and its volatility is 20% . What is the portfolio-specific (unsystematic) variance of this portfolio
What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation (SDi), covariance (COVij), and asset weight (Wi) are as shown below? Asset (A) E(R₂) = 25% SDA = 18% WA = 0.75 COVA, B = -0.0009 Select one: A. 13.65% B. 20 U ODN 20.0% C. 18.64% D. 22.5% Asset (B) E(R₂) = 15% SDB = 11% WB = 0.25
Suppose the risk-free rate is 5%. The expected return and standard deviation of a risky asset are 10% and 20%, respectively. a. What is the slope of the capital allocation line (CAL) constructed using the risk-free asset and the risky asset? A. 0.30 B. 0.15 C. 0.25 D. 0.20 b. If an investor has a risk aversion coefficient of A=2, what is the optimal fraction of the money that she invests in the risky asset? A. 62.5% B. 42.5% C. 30% D. 20% c. If an investor invest 25% of her money in the risky asset, which is the investor’s risk aversion coefficient? a. 5 b. 1 c. 3 d. 4
Assume the CAPM holds and consider stock X, which has a return variance of 0.09 and a correlation of 0.75 with the market portfolio. The market portfolio's Sharpe ratio is 0.30 and the the risk-free rate is 5%. (a) What is Stock X's expected return? (b) What proportion of Stock X's return volatility (i.e. standard deviation) is priced by the market? Explain why this number is less than 1.

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