Adequate information: Expected rate of return of risky asset =18% Standard deviation of the risky asset=28% T-bill rate is 8% Client’s degree of risk aversion A=3.5 To compute: The proportion of Y of the total investment Introduction: Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

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Answer 1

Question

Chapter 6, Problem 19PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The proportion of Y of the total investment

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The expected rate of return and the standard deviation of the enhanced portfolio related to client.

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

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Consider the following gasoline sales time series. If needed, round your answers to two decimal digits. Week Sales (1,000s of gallons) 1 17 2 21 3 19 4 23 5 18 6 16 7 20 8 18 9 22 10 20 11 15 12 22 (a) Show the exponential smoothing forecasts using α = 0.1, and α = 0.2. ExponentialSmoothing Week α = 0.1 α = 0.2 13 (b) Applying the MSE measure of forecast accuracy, would you prefer a smoothing constant of α = 0.1 or α = 0.2 for the gasoline sales time series? An smoothing constant provides a more accurate forecast, with an overall MSE of . (c) Are the results the same if you apply MAE as the measure of accuracy? An smoothing constant provides a more accurate forecast, with an overall MAE of . (d) What are the results if MAPE is used? An smoothing constant provides a more accurate forecast, with an overall MAPE of .

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Answer 2

Question

Chapter 6, Problem 19PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The proportion of Y of the total investment

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The expected rate of return and the standard deviation of the enhanced portfolio related to client.

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

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Answer 3

Question

Chapter 6, Problem 19PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The proportion of Y of the total investment

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The expected rate of return and the standard deviation of the enhanced portfolio related to client.

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

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Answer 4

Question

Chapter 6, Problem 19PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The proportion of Y of the total investment

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The expected rate of return and the standard deviation of the enhanced portfolio related to client.

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

Expert Solution & Answer

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Answer 5

Chapter 6, Problem 19PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The proportion of Y of the total investment

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The expected rate of return and the standard deviation of the enhanced portfolio related to client.

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

Answer 6

Chapter 6, Problem 19PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The proportion of Y of the total investment

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

Answer 7

Chapter 6, Problem 19PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The proportion of Y of the total investment

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

Answer 8

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The expected rate of return and the standard deviation of the enhanced portfolio related to client.

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

Answer 9

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client’s degree of risk aversion A=3.5

To compute: The expected rate of return and the standard deviation of the enhanced portfolio related to client.

Introduction:

Portfolio optimization: When an investor has to select the best portfolio or asset distribution from the given set of portfolios, he/she has to very careful as his purpose or objective of investing should be fulfilled. So, the process involving this activity can be termed as Portfolio optimization. By proper planning and calculations, the risk factor can be decreased and thereby increasing the returns.

Answer 10

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Answer 13

Ch. 6.A - Prob. 1P Ch. 6.A - Prob. 2P Ch. 6 - Prob. 1PS Ch. 6 - Prob. 2PS Ch. 6 - Prob. 3PS Ch. 6 - Prob. 4PS Ch. 6 - Prob. 5PS Ch. 6 - Prob. 6PS Ch. 6 - Prob. 7PS Ch. 6 - Prob. 8PS

Solution Summary: The author explains the process of Portfolio optimization, which involves selecting the best portfolio or asset distribution from the given set of portfolios.

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