Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260316193
Author: Bodie
Publisher: MCG
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Chapter 18, Problem 8PS

Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 12% and 16% , respectively. The beta of A is 0.7 , while that of B is 1.4 . The T-bill rate is currently 5% , whereas the expected rate of return of the S&P 500 index is 13% . The standard deviation of portfolio A is 12% annually, that of B is 31% , and that of the S&P 500 index is 18% .
a. If you currently hold a market-index portfolio, would you choose to add either of these portfolios to your holdings? Explain.
b. If instead you e0u1d invest only in T-bills and one of these portfolios, which would you choose? (LO 182)

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Portfolio return, variance, standard deviation; Author: MyFinanceTeacher;https://www.youtube.com/watch?v=RWT0kx36vZE;License: Standard YouTube License, CC-BY