You are a financial investor who actively buys and sells in the securities market. Now you have a portfolio, including four shares: $7,500 of Share A, $4,800 of Share B, $5,700 of Share C, and $2,500 of Share D.
Required:
- Compute the weights of the assets in your portfolio?
- If your portfolio has provided you with returns of 7.7%, 10.5%, - 8.7% and 14.2% over the past four years, respectively. Calculate the geometric average return of the portfolio for this period?
- Assume that expected return of the stock A in your portfolio is 13.2%. The risk premium on the stocks of the same industry are 6.8%, beta of this stock is 1.3. Calculate the risk-free
rate of return using Capital market pricing model (CAPM). ? - You have another portfolio that comprises of two shares only: $500 Tesla shares and $700 Eagle shares. Below is the data of your portfolio:
|
|
Tesla |
Eagle |
|
Expected return |
13% |
20% |
|
Standard Deviation of return |
20% |
45% |
|
Correlation of coefficient (p) |
0.4 |
Compute the expected return of your portfolio.
5. Compute the expected risk (standard deviation) of the portfolio.
Note: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for you. To get the remaining sub-part solved please repost the complete question and mention the sub-parts to be solved.
A portfolio is a combination of different stocks, bonds or assets.
CAPM or Capital Asset Pricing Model is used to measure price of an asset.
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