Adequate information: Standard deviation (σ) for both markets = 10% Expected return on every security in both markets = 10% Beta factor in the first market (ß 1 ) = 1.5 Beta factor in the second market (ß 2 ) = 0.5 The return for each security, i, in the first market = R 1 i = 0.10 + 1.5 F+ ε 1 i The return for each security, j, in the second market = R 2 j = 0.10 + 0.5 F+ ε 2 i To compute: The market that would be preferred by risk-averse to invest. Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

Question

Want to see the full answer?

Answer 1

Question

Chapter 12, Problem 8QAP

a.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

b.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

c.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

d.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The relationship between the correlation where the risk-averse person is indifferent.

Introduction: A risk-averse person is indifferent between the two markets when the risk of both markets is equal.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Complete the following using compound future value (Use the Table provided.) (Do not round intermediate calculations. Round your final answers to the nearest cent.) Time: 15 years Principal: $15,600 Rate: 3% Compounded: annually Amount: $? Interest: $?

Portfolio betas Personal Finance Problem Rose Berry is attempting to evaluate two possible portfolios, which consist of the same five assets held in different proportions. She is particularly interested in using beta to compare the risks of the portfolios, so she has gathered the data shown in the following table: a. Calculate the betas for portfolios A and B. b. Compare the risks of these portfolios to the market as well as to each other. Which portfolio is more risky? a. The beta for portfolio A is (Round to four decimal places.) The beta for portfolio B is (Round to four decimal places.) b. Which portfolio is more risky? (Select the best answer below.) A. Portfolio B B. Portfolio A ○ C. They are the same.

No aiPlease don't answer i posted blurred image mistakely. please comment below i will write values. if you answer with incorrect values i will give unhelpful confirm.

Answer 2

Question

Chapter 12, Problem 8QAP

a.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

b.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

c.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

d.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The relationship between the correlation where the risk-averse person is indifferent.

Introduction: A risk-averse person is indifferent between the two markets when the risk of both markets is equal.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 12, Problem 8QAP

a.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

b.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

c.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

d.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The relationship between the correlation where the risk-averse person is indifferent.

Introduction: A risk-averse person is indifferent between the two markets when the risk of both markets is equal.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 12, Problem 8QAP

a.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

b.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

c.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

d.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The relationship between the correlation where the risk-averse person is indifferent.

Introduction: A risk-averse person is indifferent between the two markets when the risk of both markets is equal.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 12, Problem 8QAP

a.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

b.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

c.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

d.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The relationship between the correlation where the risk-averse person is indifferent.

Introduction: A risk-averse person is indifferent between the two markets when the risk of both markets is equal.

Answer 6

Chapter 12, Problem 8QAP

a.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

Answer 7

Chapter 12, Problem 8QAP

a.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

Answer 8

b.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

Answer 9

b.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

Answer 10

c.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

Answer 11

c.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The market that would be preferred by risk-averse to invest.

Introduction: Portfolio variance refers to the measurement of the dispersion of returns. Standard deviation refers to the measurement of deviation of actual returns from average returns.

Answer 12

d.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The relationship between the correlation where the risk-averse person is indifferent.

Introduction: A risk-averse person is indifferent between the two markets when the risk of both markets is equal.

Answer 13

d.

Summary Introduction

Adequate information:

Standard deviation (σ) for both markets = 10%

Expected return on every security in both markets = 10%

Beta factor in the first market (ß₁) = 1.5

Beta factor in the second market (ß₂) = 0.5

The return for each security, i, in the first market = R1i=0.10+1.5F+ε1i

The return for each security, j, in the second market = R2j=0.10+0.5F+ε2i

To compute: The relationship between the correlation where the risk-averse person is indifferent.

Introduction: A risk-averse person is indifferent between the two markets when the risk of both markets is equal.

Answer 14

Expert Solution & Answer

Answer 15

Expert Solution & Answer

Answer 16

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 17

Ch. 12 - Prob. 1CQ Ch. 12 - Prob. 2CQ Ch. 12 - Prob. 3CQ Ch. 12 - Prob. 4CQ Ch. 12 - Market Model versus APT What are the differences...Ch. 12 - APT In contrast to the CAPM, the APT does not...Ch. 12 - CAPM versus APT What is the relationship between...Ch. 12 - Prob. 8CQ Ch. 12 - Data Mining What is data mining? Why might it...Ch. 12 - Prob. 10CQ

Solution Summary: The author explains that portfolio variance refers to the measurement of the dispersion of returns and standard deviation.

Want to see the full answer?

Chapter 12 Solutions