) You estimate that the expected return of your portfolio is 30%. The standard deviationof the return is 25%.a. The returns of your portfolio are normally distributed. What is the probabilityof your portfolio suffering a loss greater than 20% (i.e., having a return that isless than -20%)?You may find the figure below helpful in answering the question (you can alsouse Excel).b. How would your answer to part a) change if the returns of your portfolioexhibited negative skewness (relative to the normal distribution). You do notneed to do any calculations here - you just need to state whether it would be thesame, higher or lower. Please explain your answer for full credit.68.26%95.44%99.74%-30-20-10+1g+20+30+40Rate of return (%)E FocusMacBook Pro

z value = (-20 - 30)/25 = -2 so the probability = (100% - 95.44%)/2 = 2.28%

Answered: You estimate that the expected return…

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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Imagine a feasible set of portfolios with two risky assets with a correlation of -1. What name did Harry Markowitz give to the portfolios on the upper arm of the sideways 'v'? The feasible set The portfolio possibility line. The optimum set The efficient set Previous Page Next Page
a. Using the data provided in problem 3, determine the return and risk for a portfolio made up of the following three stocks if you want to distribute your investment as follows: 20% in ADRE; 65% in MSFT and 15% in GOOG.b. How would the portfolio be affected if you distributed your investment in the following way: 30% in ADRE; 25% on MSFT and 45% on GOOG?c. Which of the two portfolios would a risk seeking investor prefer and why?
Please solve only part a of this question in 2 hours and get a thumbs up
PLEASE PUT IT IN EXCEL, IT HAS TO BE IN EXCEL NO OTHER WAY OTHER THEN IN EXCEL. USE EXCEL! Question 2: Consider two risky assets, S and B, with the following characteristics: E(rs) 9%, Os 20% E(TB) 5%, OB 5% and PBS - 1 a) Is it possible to combine the two assets a portfolio such that the portfolio has zero risk (i.e. zero standard deviation)? If so, what is the composition of the zero risk portfolio? b) Suppose that in addition to trading in the risky assets S and B, investors can also freely buy, sell or short-sell a risk-free asset with risk-free rate rf. What must be the risk-free rate re? What would happen otherwise?
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Consider the following two assets: Asset Expected return Standard deviation of returns 1 18% 30% 2 8% 10% The returns on the two assets are perfectly negatively correlated (i.e. coefficient of -1). Calculate the proportions of assets 1 and 2 that generate a portfolio with a standard deviation of zero. What is the expected return of that portfolio?
Consider a risky portfolio, A, with an expected rate of return of 0.16 and a standard deviation of 0.25, that lies on a given indifference curve. Which one of the following portfolios is not likely to lie on the same indifference curve for a risk-averse investor with a mean- variance utility function? a. Expected return = 0.20; Standard deviation = 0.15 b. Expected return = 0.10; Standard deviation = 0.20 Expected return= 0.15; Standard deviation = 0.20 Expected return = 0.12; Standard deviation = 0.10 Expected return = 0.10; Standard deviation = 0.10 C. d. e.
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please this part of the question ASAP too What is the standard deviation of the rate of return on your client's portfolio? (Round your intermediate calculations and final answer to 1 decimal place.)
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(a) Determine the expected return of security X (b) To reduce the systematic risk of the portfolio, Anna is considering 3 securities to add to the portfolio. Security A has a beta of 0, security B has a beta of 0.5 and Security C has a beta of -0.3. Discuss which security will be most effective in reducing the portfolio’s systematic risk? How would portfolio expected return change (higher or lower) if you add this security?

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