What is the standard deviation of the following portfolio? |Weight Correlation(A,B) Growth Rate 3 .2 Security Standard deviation 45.45% 40% 70% 30% A .9241 O 43.15% 42.07% O 38.07% O None of the listed choices is correct O 18.62%

Q: a (i) 25% and (ii) 14% b (i) 21% and (ii) 12% c (i) 25% and (ii) 12% d None of the above e (i) 21%…

A: Given, Economic Condition Probability(P) Boom 0.1 Good  0.6 Recession 0.3

Q: If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below…

A: Capital Asset Pricing Model:It is a financial model that estimates an investment's or asset's…

Q: Securities A B C D E 7 Select one: Expected Standard Return (in %) Deviation of with 4.11 15.55 8.12…

A: Unsystematic risk, also known as specific risk, diversifiable risk, or idiosyncratic risk, refers to…

Q: am. 132.

A: The expected return of the portfolio can be calculated using the Capital Asset Pricing Model (CAPM).…

Q: You are given the following information concerning three portfolios, the market portfolio, and the…

A: The information ratio is the measure that shows the returns of the portfolio above the returns of…

Q: What is the total risk of portfolio as per Sharpe's Single Index Model if standard deviation of…

A: Total Risk = Systematic Risk + Unsystematic risk Systematic Risk = Beta 2 * SD of Market2 = (1.27)2…

Q: Return SD 0.05 0.25 0.17 0.18 0.008 A B COV A Rf this is a minimum variance question what is the…

A: Use the formula for weights in a two-asset minimum variance portfolio: [ w_A = \frac{\sigma^2_B -…

Q: Use the information provided in the table below to answer the questions that follows. (1) Average…

A: Sharpe Ratio: It represents the risk-adjusted performance of an investment. It is computed by…

Q: You are given the following information concerning three portfolios, the market portfolio, and the…

A: Sharpe ratio= (Rp-Rf) / σpwhereRp = return on portfolioRf = risk free rate =6.0%σp = standard…

Q: Consider a portfolio consisting of the following three stocks: . The volatility of the market…

A: portfolio weight volatility correlation with market beta expected return HEC CORP 0.23 11% 0.33…

Q: Consider following information on a risky portfolio, risk-free asset and the market index. What is…

A: A portfolio with all the characteristics has been provided. Capital market information are also…

Q: Consider the following information: Expected Return Portfolio Risk-free Market A Expected return 10%…

A: CAPM refers to the relationship between the expected return of the portfolio and the risk that the…

Q: Consider the following information State of Economy Probability of State of Economy Boon Rate of…

A: State of EconomyProbabilityStock 'A ReturnStock'B ReturnStock' C…

Q: Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and…

A: Expected Return on Portfolio: It is estimated by adding the individual security returns that are…

Q: 16. There are two stocks with the following return and risk values. The correlation between A and B…

A: The expected return of a portfolio gives the weighted average return that an investor can expect…

Q: Expected Return Standard Deviation Beta K 20% 12% 1.8 Y 21% 10% 2.2 M 10% 10% 0.8 me the risk-free…

A: CAPM model is used to find risk based required rate based on the risk free rate, market rate and…

Q: 6. A zero-risk portfolio has a standard deviation of: A. 0% В. 1% C. 100% D. Infinity

A: Answer and calculations are given below

Q: You are given the following information concerning three portfolios, the market portfolio, and the…

A: The Sharpe ratio evaluates returns relative to risk, the Treynor ratio assesses systematic risk, and…

Q: USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset (A) Asset (B) E(RA) = 10% E(RB) = 15%…

A: Standard deviation of the portfolio is the statistical measure to determine the risk of change in…

Q: A portfolio manager creates the following portfolio: Security Security Weight Expected Standard…

A: Standard deviation of portfolio is dependent on the weight of each security in the in the portfolio…

Q: The following expected return and the standard deviation of current returns are known: Security…

A: Portfolio standard deviation is the standard deviation of all the different investments in the…

Q: You have the following information: A B C 2% 3% 1.5 0.5 2 Alpha 1% Beta 2 D -2% Market 0% 1 Res.…

A: The performance of the portfolio can measure by using the 3 different methods as Sharpe ratio, the…

Q: 37. Assume the managed portfolio expected return is 30% and standard deviation is 40%. The market…

A: M2 measure of a portfolio = [(Rp - Rf) x (sdM / sdP) ] - (Rm-Rf)whereRp = return on portfolio =30%Rf…

Q: Weight of B: Return of A: Return of B: Standard deviation of A: Standard deviation of B: Coefficient…

A: The objective of the question is to calculate the weight of B, return of A and B, standard deviation…

Q: Consider the following Information: Portfolio ER SD Risk Free Market 6.00 13.2 A 11.2 a. Calculate…

A: Sharpe Ratio = (Return on portfolio - Risk-free rate) / SDCalculate the Sharpe ratios for the market…

Q: Based on the hypothetical portfolios provided in the table below, which of the portfolios would lie…

A: Portfolios lying on the efficient frontier are considered the most desirable as they provide the…

Q: ired Year 0 1 2 3 4 5 Return Alpha Sum Tracking Error Information Ratio Note: the numbers in red are…

A: Information ratio is calculated as shown below.

Q: What is the required rate of return for Stock X based on the capital asset pricing model (CAPM)?

A: Required Rate of Return for Stock: It is a minimum acceptable rate of return for equity investors…

Q: Baghiben

A: Portfolio Performance MeasuresWe can calculate the Sharpe ratio, Treynor ratio, and Jensen's alpha…

Q: Portfolio Portfolio Expected Return Beta 4.53 % 2.20 X % 43.55 X % 65.10 X % 86.65 X % 108.20 X %…

A: Given, Expected return of asset W = 13.15% Beta of asset W = 1.28 Risk free rate = 4.53% Note: 1.…

Q: f you plot the relationship between portfolio expected return and portfolio b he slope of the line…

A: CAPM gives the risk adjusted return of the stock and is represented by the equation of the SML line…

Q: Portfolio theory with two assets E(R1)=0.15 E(01)= 0.10 W1=0.5 E(R2)=0.20 E(02) = 0.20 W2=0.5…

A: Step 1: Calculate the expected return of the portfolioThe expected return of a portfolio is…

Q: onsider the historical return data of ABC portfolio as below. 1990 4% 1991 10% 1992 2%…

A: Sample (empirical) probability = Number of times the event occurred / Total number of samples

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

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.