You are a provider of portfolio insurance and are establishing a four-year program. The portfollo you manage is currently worth $60 million, and you promise to provide a minimum return of 0%. The equity portfolio has a standard deviation of 25% per year, and T-bills pay 5.2% per year. Assume that the portfolio pays no dividends. Required: a-1. How much of the portfolio should be sold and placed in bills? (Input the value as a positive value. Do not round intermediate calculations and round your final percentage answer to 2 decimal places.) Portfolio in bills a-2. How much of the portfolio should be sold and placed in equity? (Input the value as a positive value. Do not round intermediate calculations and round your final percentage answer to 2 decimal places.) Portfolio in equity

You are a provider of portfolio insurance and are establishing a four-year program. The portfollo you manage is currently worth $60 million, and you promise to provide a minimum return of 0%. The equity portfolio has a standard deviation of 25% per year, and T-bills pay 5.2% per year. Assume that the portfolio pays no dividends. Required: a-1. How much of the portfolio should be sold and placed in bills? (Input the value as a positive value. Do not round intermediate calculations and round your final percentage answer to 2 decimal places.) Portfolio in bills a-2. How much of the portfolio should be sold and placed in equity? (Input the value as a positive value. Do not round intermediate calculations and round your final percentage answer to 2 decimal places.) Portfolio in equity

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

You are choosing between these four investments, and you want to be 95% certain that you do not lose more than 18.00% on your investment. Which investments could you choose? Average Return Standard Deviation of Returns S&P TSX 10.32% 16.35% S&P 500 in CAD 12.10% 17.00% Long-Term Gov't of Canada Bonds 7.89% 10.20% Which of the following have the lower bound of the estimated range greater than 18.00%? A. All of the Investments B. T-Bills only C. S&P TSX and S&P 500 in CAD D. Long-term Government of Canada Bonds and S&P 500 in CAD E. Long-term Government of Canada Bonds and T-Bills T-Bills 5.59% 3.93%
You follow the equity index HSI using an index fund in Hong Kong. You have signed aninterest rate swap to exchange the capital gains (losses) from your portfolio, against a sequenceof cash flows based on 3-month Libor plus 25 bp. The cash flows are exchanged every 90 days.All cash payments occur in Hong Kong dollars.The notional principal is 1 million.a. Draw the cash flow diagram for the first year.b. Let It be the value of the index at time t. Suppose you have the following data:I0 = 23,850 I1 = 24,000 L0 = 4.5%What is the net amount exchanged at period 1?
1. You are selected as an analysis to manage a fixed income portfolio for a client in particular a corporate bond. You are considering a 3-year floating rate note with 1 year benchmark rate of 2.88%. It is priced at 685 of 1000 par value. Your analysis tells you probability of default is approximately 40%. If the issue survives over the next three years due to the industry it is in. The probability of default for each year is 9% and a volatility of 12%. What is the price of the bond?
You are selected as an analysis to manage a fixed income portfolio for a client in particular a corporate bond. You are considering a 3-year floating rate note with 1 year benchmark rate of 2.88%. It is priced at 685 of 1000 par value. Your analysis tells you probability of default is approximately 40%. If the issue survives over the next three years due to the industry it is in. The probability of default for each year is 9% and a volatility of 12%. What is the price of the bond
Required: A hedge fund with $1.8 billion of assets charges a management fee of 3% and an incentive fee of 20% of returns over a money market rate, which currently is 6%. Calculate total fees, both in dollars and as a percent of assets under management, for portfolio returns of: (Enter your answers in millions rounded to 1 decimal place.) Portfolio Rate of Return (%) a. -1 b. 0 c. 6 d. 12 Total Fee ($ million) Total Fee (%)
Other relevant information about the company follows: The 20-year Treasury Bond rate is currently 4.5 percent and you have estimated market-risk premium to be 6.75 percent using the returns on stocks and Treasury bonds from 2010 to 2019. Pharmos Incorporated has a marginal tax rate of 25 percent. Required: Answer the following question given the information above and from the photo attached 1. What is the estimated Internal Rate of Return (IRR) of the project? NO EXCEL SPREADSHEETS SHOW FULL WORKINGS WITHOUT EXCEL
Suppose money invested in a hedge fund earns 1% per trading day. There are 250 trading days per year. With an initial investment of $100, what will be your annual return assuming the manager puts all of your daily earnings into a zero-interest-bearing checking account and pays you everything earned at the end of the year? *Make sure to input all currency answers without any currency symbols or commas, and use two decimal places of precision.
(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security One-year Treasury bills are currently paying 3.1 percent. Calculate the investment's expected return and its standard deviation Should Gautney invest in this security? Probability 0.10 0.50 Return -6% 1% 5% 9% 0.30 0.10 (Click on the icon in order to copy its contents into a spreadsheet.) CID a. The investment's expected return is%. (Round to two decimal places)
Suppose that you have the following utility function: U=E(r) – ½ Aσ2 and A=3 Suppose that you have $10 million to invest for one year and you want to invest that money into ETFs tracking the S&P 500 (US) and S&P/TSX 60 (Canada) index, which are often used as proxies for the US and Canadian stock markets, respectively, and the Canadian one-year T-bill. Assume that the interest rate of the one-year T-bill is 0.35% per annum. You have found two ETFs that you are interested in. From a set of their historical data between 2001 and 2019, you have estimated the annual expected returns, standard deviations, and covariance as follows: ETFUS : E(r)= 0.070584 0.173687 ETFCDA : E(r)= 0.073763 0.16816 Covariance between ETFUS and ETFCDA = 0.02397 Answer the following questions using Excel: What is the optimal portfolio of ETFUS and ETFCDA? Also submit an Excel file to show your work.
Km for the following Individual or component costs of capital) Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in this compute the cost of capital for the a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.4 percent mat is paud semiannually. The bond is currently selling for a price of $1,121 and will mature in 10 years The firm's tax rate is 34 percent b. If the firm's bonds are not frequently traded, how would you go about determining a cost of debt for this company? A new common stock issue that paid a $174 dividend last year. The par value of the stock is $15, and the firm's dividends per share have grown at a rate of 81 percent per year. This growth rate is expected to continue into the foreseeable tuture The pnce of this stock is now $27 12 d. A preferred stock paying a 10.7 percent dividend on a $126 par value The preferred shares are currently selling for…
You invest 60% of your financial assets in Standard & Poor's Depository Receipts (SPY) and 40% of your financial assets in MSCI EAFE Index Fund (EFA). SPY has an expected return of 8% and a standard deviation of 15%. EFA has an expected return of 10% and a standard deviation of 18%. The correlation between the two investments is 0.6. The risk- free rate is 1%. a. Briefly explain the investment strategies of SPY and EFA. b. What is the expected return, the standard deviation, and the Sharpe ratio of your portfolio? Show the mathematical equations that you use to derive these measures.
B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 2.9 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability Return0.15 -3%0.30 2%0.40 4%0.15 6% The investment's standard deviation is _______ % . round to two decimal places

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