"You manage a risky portfolio with an expected rate of return of 11% and a standard deviation of 37%. The T-bill rate is 4%. Stock A 29% Stock B Stock C 35% 36% Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 10%. Required: a. What is the proportion y? b. What are your client's investment proportions in your three stocks and the T-bill fund? c. What is the standard deviation of the rate of return on your client's portfolio? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the proportion y? Note: Round your answer to the nearest whole number. Proportion y %

"You manage a risky portfolio with an expected rate of return of 11% and a standard deviation of 37%. The T-bill rate is 4%. Stock A 29% Stock B Stock C 35% 36% Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 10%. Required: a. What is the proportion y? b. What are your client's investment proportions in your three stocks and the T-bill fund? c. What is the standard deviation of the rate of return on your client's portfolio? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the proportion y? Note: Round your answer to the nearest whole number. Proportion y %

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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Consider two well-diversified portfolios: Portfolio 1 has an expected return of 8% and a beta of 0.80 while Portfolio 2 has an expected return of 13% and a beta of 1.50. If the risk-free rate is 1.5%, which portfolio would a rational risk-averse investor prefer and why? O A. Portfolio 2 because it has the higher reward to risk ratio. O B. Portfolio 1 because it has the higher reward to risk ratio. OC. Portfolio 2 because it has the higher reward. O D. Portfolio 1 because it has the lower risk.
Please solve only part a of this question in 2 hours and get a thumbs up
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 ?
Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 27% 33 40 Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 15%. Required: a. What is the proportion y? (Round your answer to 1 decimal place.) Proportion y 0.8 X %
d. Create a portfolio P comprising Firms A and B. Calculate P's average return and standard deviation using the weights given below. Using the Excel function std dev is sufficient. Also, report the covariance. Weight in Firm A Weight in Firm B 10% 90% 20% 80% 30% 70% 40% 60% 50% 50% 60% 40% 70% 30% 80% 20% 90% 10% Average return Standard Deviation e. What is your takeaway from this exercise - would you prefer to own stock in Firm A or Firm B? If you had to buy both - which weight allocation would you prefer based on the numbers above? Explain. f. Would you currently be interested in buying stock in either firm? Explain why.
Question 1: Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. Stock A Stock B Stock C 1. Calculate the client expected return on the complete portfolio 2. Calculate the reward-to-variability ratio (Sharpe ratio): Part B A three-asset portfolio has the following characteristics: Expected Return Asset X Y Z 15% 10 6 Standard Deviation What is the expected return on this three-asset portfolio? 27% 33% 40% 22% 8 3 Weight 0.50 0.40 0.10
Consider two types of assets: market portfolio (M) and stock A. The expected return is 8% and standard deviation of the market portfolio is 15%. The risk-free rate is 2%. The standard deviation of market portfolio returns is 15%. The standard deviation of stock A is 30%, and the beta coefficient is 1. Draw the capital market line and show the position of stock A.
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 15% and a standard deviation of return of 16.0%. Stock B has an expected return of 11% and a standard deviation of return of 4%. The correlation coefficient between the returns of A and B is 0.50. The risk-free rate of return is 7%. The proportion of the optimal risky portfolio that should be invested in stock A is __________.
K You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 37%. The T-bill rate is 4%. Your client chooses to invest 80% of a portfolio in your fund and 20% in a T-bill money market fund. What is the reward-to-volatility (Sharpe) ratio (S) of your risky portfolio? Your client's? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Your reward-to-volatility (Sharpe) ratio Client's reward-to-volatility (Sharpe) ratio
The expected return for asset A is 4.00% with a standard deviation of 9.00%, and the expected return for asset B is 6.75% with a standard deviation of 3.00%. Based on your knowledge of efficient portfolios, fill in the blanks in the following table with the appropriate answers. Proportion of Portfolio in Security A WA 1.00 0.75 0.50 0.25 0.00 Proportion of Portfolio in Security B WB 0.00 0.25 0.50 0.75 1.00 Expected Portfolio Return FP 4.00% 4.69% 6.06% 6.75% Standard Deviation Op Case I (PAB= -0.4) 6.5 4.1 2.5 3.0 Standard Deviation op Case II (PAB= 0.3) 9.0 5.2 3.6 3.0 The minimum risk portfolio allocation to asset A within the portfolio for case III is. Therefore, you are better off Standard Deviation op Case III (PAB=0.8) 9.0 7.4 5.8 ▼ 3.0
You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 34%. The T-bill rate is 4%. Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolio's standard deviation will not exceed 10%. Required: a. What is the investment proportion, y? b. What is the expected rate of return on the complete portfolio?
You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 33%. The T-bill rate is 2%. Your client chooses to invest 75% of a portfolio in your fund and 25% in an essentially risk-free money market fund. What are the expected return and standard deviation of the rate of return on his portfolio? Note: Round your answers to 2 decimal places. Expected return Standard deviation % %

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