Your client has $95,000 invested in stock A. She would like to build a two-stock portfolio by investing another $95,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.5% and as low a risk as possible, but thestandard 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 ReturnStandard DeviationCorrelation with AA17%47%1.0012%38%0.1412%38%0.27The expected return of the portfolio with stock B is%. (Round to one decimal place.)The expected return of the portfolio with stock C is %. (Round to one decimal place.)The standard deviation of the portfolio with stock B is%. (Round to one decimal place.)The standard deviation of the portfolio with stock C is %. (Round to one decimal place.)(Select from the drop-down menu.)You would advise your client to choosebecause it will produce the portfolio with the lower standard deviation.stock Bstock C

Required:Advise the client which stock to choose for the portfolio, the expected portfolio return,…

Your client has $95,000 invested in stock A. She would like to build a two-stock portfolio by investing another $95,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.5% 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 47% 38% 38% A 17% 1.00 B 12% 0.14 12% 0.27 The expected return of the portfolio with stock B is %. (Round to one decimal place.) The expected return of the portfolio with stock C is %. (Round to one decimal place.) The standard deviation of the portfolio with stock B is %. (Round to one decimal place.) The standard deviation of the portfolio with stock C is %. (Round to one decimal place.) (Select from the drop-down menu.) You would advise your client to choose because it will produce the portfolio with the lower standard deviation. stock B stock C

Your client has $95,000 invested in stock A. She would like to build a two-stock portfolio by investing another $95,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.5% 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 47% 38% 38% A 17% 1.00 B 12% 0.14 12% 0.27 The expected return of the portfolio with stock B is %. (Round to one decimal place.) The expected return of the portfolio with stock C is %. (Round to one decimal place.) The standard deviation of the portfolio with stock B is %. (Round to one decimal place.) The standard deviation of the portfolio with stock C is %. (Round to one decimal place.) (Select from the drop-down menu.) You would advise your client to choose because it will produce the portfolio with the lower standard deviation. stock B stock C

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

An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 16% and a standard deviation of return of 9.0%. Stock B has an expected return of 12% and a standard deviation of return of 3%. The correlation coefficient between the returns of A and B is 0.60. The risk-free rate of return is 7%. The proportion of the optimal risky portfolio that should be invested in stock A is Multiple Choice O O 0% 60% 51% 67%
You manage a risky portfolio containing 25% of Stock A, 32% of Stock B and 43% of Stock C, respectively, with expected rate of return of 18% and standard deviation of 28%. The Tbill rate is 8%. Draw the Capital Allocation Line (CAL) of your portfolio on an expected returnstandard deviation diagram. What is the slope of the CAL? Suppose that the 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 16%. Show the position of your client on your fund’s CAL. What is the proportion y? What are your client’s investment proportions in your three stocks and the T-bill fund?
Assume that you manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 41%. The T-bill rate is 4% A client prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio subject to the constraint that the overall portfolio's standard deviation will not exceed 30%. Required: a. What is the investment proportion, y? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Investment proportion y % b. What is the expected rate of return on the overall portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return %
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 12% and a standard deviation of return of 15.0%. Stock B has an expected return of 8% and a standard deviation of return of 3%. The correlation coefficient between the returns of A and B is 0.60. The risk-free rate of return is 6%. The proportion of the optimal risky portfolio that should be invested in stock A is Multiple Choice O O O 0% 60% 45% 66%
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.)
Please answer fast i give you upvote.
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.
You manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 36%. The T-bill rate is 3%. Stock A 27% Stock B 35% Stock C 38% 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: What is the proportion y? What are your client’s investment proportions in your three stocks and the T-bill fund? What is the standard deviation of the rate of return on your client’s portfolio?
A 268.
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?
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 __________.

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