Hrm 531 Week 3 Regression Analysis Paper

A and C will offer the same mean return yet less variance than B. This is pictured

15. Investment A has an expected return of $25 million and investment B has an expected return of $5 million. Market risk analysts believe the standard deviation of the return A is $10 million, and for B is $30 million (negative returns are possible here).

So the investor will invest 81.76160279% of the investment budget in the risky asset and 18.23839721% in the

d. What would be the investor 's certainty equivalent return for the optimally chosen combination? 2. Consider an investor who has an asset allocation of 50% in equities and the rest in T-Bills. Suppose the expected rate of return on equities is 10%/year and the standard deviation of the return on equities is 15%/year. T-Bills earn 6%/year. a. What is the implied risk aversion coefficient of the investor?

a. Calculate the expected return over the 4-year period for each of the three alternatives.

b. What would Mrs. Beach have to deposit if she were to use common stock and earned an average rate of return of 11%.

3. The expected return for each firm was calculated: Expected Return = Alpha + (Beta x BSE 500 actual return).

1. You have a portfolio with a beta of 3.1. What will be the new portfolio beta if you keep 85 percent of your money in the old portfolio and 15 percent in a stock with a beta of 4.5?

The remaining alternatives for this client are to invest in U.S. Rubber, a market portfolio, and a 2-stock portfolio of High Tech and Collections. The expected rates of return are 9.8% in U.S. Rubber, 10.5% in a market portfolio, and 6.7% in the 2-stock portfolio.

portfolio change if you assume a correlation between GE and GM of 0.80 or –0.80?

Alex Sharpe should invest in Portfolio A, consisting of Reynolds and S&P500. Portfolio A gives higher return with lower risk. The standard deviation and the variance are both lower for portfolio A which means

(10 points) Suppose the expected returns on equity of two firms, Macrosoft and Microsoft, that

9. Assume the weight, W, of a randomly selected adult has a normal distribution with a mean

Finally, the Expected Rate of Return is calculated by multiplying the NPV for each scenario by

2. What would have been Martin’s return for years 2000, 2001, and 2002 if his portfolio had remained with its initial holdings?