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 east 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? Standard Deviation Correlation with A Expected Return 15% 13% 13% A B C 47% 40% 40% The expected return of the portfolio with stock B is 1.00 0.11 0.32 %. (Round to one decimal place.)

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 east 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? Standard Deviation Correlation with A Expected Return 15% 13% 13% A B C 47% 40% 40% The expected return of the portfolio with stock B is 1.00 0.11 0.32 %. (Round to one decimal place.)

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 manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 34%. The T-bill rate is 8%. Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 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 17%. a. What is the proportion y? (Round your answer to the nearest whole number.) Proportion y 45% 32% 23% T-Bills Stock A Stock B Stock C b. What are your client's investment proportions in your three stocks and the T-bill fund? (Do not round intermediate calculations. Round your answers to 2 decimal places.) % Investment Proportions % % % %
Your client has $103,000 invested in stock A. She would like to build a two-stock portfolio by investing another $103,000 in either stock B or C. She wants a portfolio with an expected return of at least 15.0% 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 16% 46% 1.00 B 14% 38% 0.18 C 14% 38% 0.28 The expected return of the portfolio with stock B is %. (Round to one decimal place.)
Assume you have an optimal risky portfolio with an expected return of 17% and a standard deviation of 27%, if the current risk free rate is 5% what is the optimal percentage to invest in ORP (y*)? Please write all percentages as decimals (for example write .242 instead of 24.2%). Use a risk aversion measure (A) of 2. Note: Correct answer is 0.8230 Please explain?
An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 12%, the return on the SMB portfolio (rSMB) is 2.1%, and the return on the HML portfolio (rHML) is 4.6%. If ai = 0, bi = 1.2, ci = -0.4, and di = 1.3, what is the stock's predicted return? Do not round intermediate calculations. Round your answer to two decimal places.
What is the Sharpe ratio (S) of your risky portfolio and your client’s overall portfolio? , 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%.
he risk-free rate is 4.2 percent and the expected return on the market is 12.3 percent. Stock A has a beta of 1.2 and an expected return of 13.1 percent. Stock B has a beta of 0.75 and an expected return of 11.4 percent. Are these stocks correctly priced? Why or why not? No, Stock A is underpriced and Stock B is overpriced. No, Stock A is overpriced and Stock B is underpriced. No, Stock A is overpriced but Stock B is correctly priced. No, Stock A is underpriced but Stock B is correctly priced. Yes, both stocks are correctly priced.
A 268.
You are considering three stocks—A, B, and C—for possible inclusion in your investment portfolio. Stock A has a beta of 0.80, stock B has a beta of 1.40, and stock C has a beta of -0.30. If the return on the market portfolio increased by 12%, what change would you expect in the return for each stock? If the return on the market portfolio decreased by 5%, what change would you expect in the return for each stock?
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?
I am having trouble solving this problem. Can you please provide me with some help? Thank you. I appreciate it. You estimate that the expected return of MSFT stock is 4%, and standard deviation of MSFT stock is 9%. The expected return of AAPL stock is 3%, and standard deviation of MSFT stock is 8%. If the correlation between AAPL returns and MSFT returns is 80%, what is the expected return and standard deviation of a portfolio with $4,000 invested in MSFT and $6,000 invested in AAPL?
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 %
An analyst who believes in the Treynor Black Model has identified one active stock, stock A, which he/she wants to combine with the passive Market Index M to form their firm's optimal risky portfolio. A regression of the excess returns of stock A on the excess returns of the market index M, have discovered that stock A's alpha is 4%, its beta is 2.0, and the residual standard deviation of the error term for stock A is 18%. The standard deviation for the market index M is 14%, the expected return on M is 11%, the risk-free rate of return is 3%, and the expected return on stock A is 22%. What is the Sharpe Ratio for the optimal risky portfolio formed by the optimal combination of the active stock A with the passive market index M? Note that the Sharpe Ratio is usually expressed as a decimal.

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