You have $132,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free asset. You must Invest all of your money. Your goal is to create a portfolio that has an expected return of 14 percent and that has only 82 percent of the risk of the overall market. If X has an expected return of 40 percent and a beta of 1.5, Y has an expected return of 20 percent and a beta of 1.1, and the risk-free rate is 4 percent, how much money will you Invest in Stock Y? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Amount SA

You have $132,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free asset. You must Invest all of your money. Your goal is to create a portfolio that has an expected return of 14 percent and that has only 82 percent of the risk of the overall market. If X has an expected return of 40 percent and a beta of 1.5, Y has an expected return of 20 percent and a beta of 1.1, and the risk-free rate is 4 percent, how much money will you Invest in Stock Y? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Amount SA

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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You have $138,000 to invest in a portfolio containing Stock X, Stock Y, and a risk - free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 13 percent and that has only 76 percent of the risk of the overall market. If X has an expected return of 31 percent and a beta of 1.8, Y has an expected return of 20 percent and a beta of 1.2, and the risk - free rate is 7 percent, how much money will you invest in Stock Y?
You want to invest $45,000 in a portfolio with a beta of no more than 1.44 and an expected return of 14.3%. Bay Corp. has a beta of 0.83 and an expected return of 10.8%, and City Inc. has a beta of 1.9 and an expected return of 16.98%. The risk-free rate is 6%. You can invest in Bay Corp. and City Inc. How much will you invest in each?
SHIELD Enterprises has an expected return of 15% and a beta of 1.5. HYDRA Industries has an expected return of 20% and a beta of 2. The risk-free rate is 6%. Does an arbitrage opportunity exist? If yes, how can an investor can take advantage of it. Give specific details about how to form the portfolio, what to buy and what to sell.
You have been managing a $5 million portfolio that has a beta of 1.05 and a required rate of return of 10.775%. The current risk-free rate is 5%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.75, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two decimal places.
Tasman Co. has a beta of 0.9, and an expected return of 15%. Macquarie Co. has a beta of 1.2 and an expected return of 16%. Lucy plans to invest in both stocks. If risk-free rate is 2.5%, and Lucy are spreading her money equally on both stocks, what is the expected return on Lucy’s portfolio? If a portfolio of the two assets has a beta of 0.95, what are the portfolio weights? If Lucy includes one more risk-free asset into her existing portfolio in part (b), and this new portfolio has a beta of 1.3. what are the portfolio weights? How do we interpret the weight for the risk-free asset?
You are considering investing $1,000 in a T-bill that pays 4% and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 30% and 70%, respectively. X has an expected rate of return of 13% and a standard deviation of 20%, and Y has an expected rate of return of 10% and a standard deviation of 14%. If you want to form a portfolio with an expected rate of return of 10%, what percentages of your money must you invest in the T-bill, X, and Y. respectively, if you keep X and Y in the same proportions to each other as in portfolio P? [Select] If the correlation coefficient between X and Y is 0.15 then what is the standard deviation of the complete portfolio? [Select]
You are examining a portfolio manager’s active investing portfolio. The portfolio has a beta of 2 and has an average return of 15%. The risk free rate is 1% and the market return is 10%, is the manager’s active investing strategy working ?
Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $75,000with a probability of 25%, $125,000 with a probability of 50%, or $140,000 with a probability of 25%.The alternative risk-free investment in T-bills pays 4% per year. a) If you require a risk premium of 8%, how much will you be willing to pay for the portfolio?b) What is the Sharpe ratio of the portfolio if you can purchase it at the price calculated above?
Consider stocks of Firms A and B. Their expected returns are 12% and 11%, respectively, and the volatilities of their returns are 8% and 10%, respectively. Firm A has a market beta of 1.5 and Firm B has a market beta of 1.0, and the correlation between the two stocks is 0.5. Your risk-averse client wants to invest $5 million with an expected return of 15%. You can put together a portfolio with the market index, Firm A, Firm B, and a risk-free asset. Which of these four securities would you include in the portfolio and how much would you invest in each security?
Give typing answer with explanation and conclusion
Your client has $102,000 invested in stock A. She would like to build a two-stock portfolio by investing another $102,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.0% and as low a risk as possible, but the standard deviation must be no more than 40%. What do you advise her to do, and what will be the portfolio expected return and standard deviation? Expected Return Standard Deviation Correlation with A A B с 15% 13% 13% 47% 40% 40% Part 1 of 5 The expected return of the portfolio with stock B is 1.00 0.11 0.32 %. (Round to one decimal place.)
You have been managing a $5 million portfolio that has a beta of 1.35 and a required rate of return of 11.775%. The current risk-free rate is 3%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 1.05, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two decimal places. %

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