A portfolio has an expected annual return of 12.2% and a standard deviation of 18.2%. What is the smallest expected loss over the next calendar quarter given a probability of 1%? 17.49% 17.25% 18.87% 18.12% 16.55%

A portfolio has an expected annual return of 12.2% and a standard deviation of 18.2%. What is the smallest expected loss over the next calendar quarter given a probability of 1%? 17.49% 17.25% 18.87% 18.12% 16.55%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13P

See similar textbooks

Related questions

Q: The market portfolio has an expected return of 11.5 percent and a standard deviation of 19 percent.…

A: Data given:: Standard deviation of well diversified portfolio = 9% Standard deviation of a market…

Q: The analysts at FNB forecasted that the return on DJIA index portfolio over the coming year will be…

A: The degree of risk aversion of the average investors can be denoted as Beta. Variance of returns…

Q: At a yield rate of j = 4%, an asset portfolio has a Macaulay duration of 8.36 years, with a…

A: To calculate percentage change in the value of portfolio we use the formula:- Percentage change in…

Q: 5. The change in the value of a portfolio in three months is normally distributed with a mean of…

A: Value at Risk - It refers to the tool of measuring the riskiness of the portfolio assets of the…

Q: alue of $500 million. The beta of the ortfolio approximates the market portfolio, hose standard…

A: In this we have to calculate VaR of the portfolio.

Q: Your portfolio has provided you with returns of 8.6 percent, 14.2 percent, -3.7 percent, and 12.0…

A: Geometric average return is a very useful tool which is used by investors to calculate the rate of…

Q: The optimal risky portfolio has a Sharpe ratio of 0.8 and a standard deviation of 20%. The minimum…

A: Since both the portfolios have risks higher then the desired risk, we need to combine them with risk…

Q: Following is forecast for economic situation and Rachel’s portfolio returns next year, calculate the…

A: Probability Return on stock Mild recession 0.35 -5.00% Growth 0.45 15.00% Strong growth 0.2…

Q: 8

A: Expected return and weight: Fremont Enterprise = 15% and 30% weight Laurel Hurst = 20% and 70%…

Q: Consider a portfolio with expected annual return of 21.1% and volatility of 38%. Determine an…

A: Required:Compute the analytical Value at Risk for one month.

Q: A stock is estimated to have a covariance with the market of 0.45. For the coming period, the market…

A: The Capital assets pricing model shows the relationship between the risk-free rate and the expected…

Q: Your portfolio had the values in the following table for the four years listed: 1. a. Calculate your…

A: Given:

Q: Suppose that you have $1 million and the following two opportunities from which to construct a…

A: The Expected rate of return of the portfolio or overall return of the portfolio refers to the total…

Q: (CAPM and expected returns) a. Given the following holding-period returns, LOADING... Month…

Q: Based on current dividend yields and expected capital gains, the expected rates of return on…

A: The capital asset pricing model (CAPM) refers to the model which tells us how the financial markets…

Q: Suppose the risk-free return is 7.9% and the market portfolio has an expected return of 11.5% and a…

A: Risk free rate = 7.9% Stock beta = 0.77 Market return = 11.5%

Q: A portfolio manager creates the following portfolio: Assets Expected Annual Return % Annual Standard…

A: Given:

Q: A portfolio has a beta of 1.2 and an actual return of 14.1 percent. The risk-free rate is 3.5…

A: Given: Beta = 1.2 Actual return = 14.1% Risk free rate = 3.5% Market risk premium = 7.4%

Q: Based on current dividend yields and expected capital gains, the expected rates or return on…

A: Capital asset pricing model can be used to study the how systematic risk on a particular asset is…

Q: Consider a portfolio consisting of $ 10 million invested in the S&P 500 and $ 7.5 million…

A: Part (a): Calculation of VAR for one year: Answer: VAR for one year is loss of $1,052,174

Q: In a perfect world where asset return is normally distributed. We have risk and return…

A: The expected return on a portfolio is the weighted average of the expected return s of the…

Q: In a perfect world where asset return is normally distributed. We have risk and return…

A: Here, Assets ABC DEF Market portfolio Expected Return 10% 15% 5% Standard Deviation 20% 40%…

Q: A stock has a beta of 1.15 and an expected return of 11.4 percent. A risk-free asset currently earns…

A: Given, Return on risky asset = 11.40% Return on risk free asset = 3.50% Beta of risky asset = 1.15…

Q: Your portfolio has 1 Standard Deviation of +/- 19% points from the average ATR of +12%. Given this…

A: Average True Range: Over a given time period, ATR is the average of the actual ranges that occurred.…

Q: Returns State of Probability of State of Economy Economy Stock A Stock B Stock C Boom .40 15% 18%…

A: Expected return = weighted average return of the stocks in portfolio Stock A = 35% Stock B = 45%…

Q: Fremont Enterprises has an expected return of 17% and Laurelhurst News has an expected return of…

A: As the portfolio of an investor comprises of several funds, the expected return for complete…

Q: Consider a stock with an initial price of $40, an expected return of 16% per annum, and a volatility…

A: Initial price = $40 Expected return =16% per annum Volatility = 20% per annum

Q: Suppose that today's price of ABC stock is $100 and it is known that price moves up or down by a…

A: Given here annual variance of the underlying stock prices is 36%, Volatality is square root…

Q: A respected analyst forecasts that the return of the S&P 500 index portfolio over the coming year…

A: Risk aversion It is the tendency of people to prefer outcomes with very low uncertainty to those…

Q: the one year ahead forecasted return on a portfolio is always 3% and dividends on the portfolio are…

A: Market price of portfolio is present value of dividend.

Q: Based on current dividend yields and expected capital gains, the expected rates of return on…

A: The term ‘Alpha’ refers to the active return on investment. In other words, the excess return from…

Q: The market portfolio's historical returns for the past three years were 10 percent, 10 percent, and…

A: Average market return = Sum of returns / number of returns Risk free rate of return = 0.04…

Q: 88.0

A: Formula to calculate the actual return @95.44% confidence is: 95.44% = [Mean - 2*standard deviation,…

Q: What is the standard deviation of the returns of a portfolio that produced returns of -14%, 30%, and…

A: Standard Deviation is the square root of the Square of Deviation from the mean return divided by the…

Q: If the risk free rate is 4 9%, the expected return on the market portfolio is 1296 and the beta of…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: Consider a stock where the current price is Ksh.120, the expected return is 20% per annum, and the…

A: The question is based on the concept of probability distribution over a year in continuous…

Q: A stock's initial value was $ 15 and the value after two years is $25. a. Find out the holding…

A: Given: Initial Value = $15 Value after 2 years = $25 Number of period = 2 Holding period return…

Q: As a portfolio manager for Bank of America Merrill Lynch, you are managing a portfolio of $33.90…

A: The Value at Risk: The value of risk attempts to measure the maximum loss a portfolio can take for a…

Q: During the year just ended, Anna Schultz's portfolio, which has a beta of 0.97, earned a return of…

A: Treynor's Ratio = (Average rate of portfolio-risk free rate)/Beta of the portfolio

Q: Following is forecast for economic situation and Rachel’s portfolio returns next year, calculate the…

A: Expected return: It is a return expected by an investor from an investment according to the risk…

Q: Using CAPM A stock has an expected return of 10 percent, its beta is .70, and the risk-free rate is…

A: This question require us to compute the expected return on the market i.e. Rm

Q: A portfolio has a 4.0 percent chance of losing 15 percent or more according to the VaR when T =…

A: Number of years for a possible loss of 1 year is calculated by total loss and the expected loss in 1…

Q: An analyst wants to evaluate Portfolio X consisting entirely of US common stocks, using both the…

A: Sharpe and Treynor ratios are calculated by the investors to determine the relationship between the…

Q: Consider an equal-weighted portfolio that comprises two assets: A and B. The monthly returns for…

A: To Find: X

Q: Fremont Enterprises has an expected retun of 15% and Laurelhurst News has an expected return of 20%…

A: Investors have different options to make investments, and the motive behind investments is to…

Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

A portfolio has an expected annual return of
12.2% and a standard deviation of 18.2%.
What is the smallest expected loss over the
next calendar quarter given a probability of
1%?
17.49%
17.25%
18.87%
18.12%
16.55%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 Given Information

VIEW

Step 2 Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

A portfolio has an expected annual return of 14.9 percent and a standard deviation of 18.5 percent. What is the smallest expected loss over the next 25 days given a probability of 1.0%? Note 1.0% =z=2.326 A. -8.25% B. -10.25% C. -12.25% D. -14.25%
Security F has an expected return of 10 percent and a standard deviation of 43 percent per year. Security G has an expected return of 15 percent and a standard deviation of 62 percent per year. Required: (a) What is the expected return on a portfolio composed of 30 percent of Security F and 70 percent of Security G? (b) If the correlation between the returns of Security F and Security G is .25, what is the standard deviation of the portfolio described in part (a)?
You observe a portfolio for five years and determine that its average return is 11.8%and the standard deviation of its returns in19.6%.Would a 30% loss next year be outside the 95% confidence interval for this portfolio? The low end of the 95% prediction interval is ...%
Your portfolio has 1 Standard Deviation of +/- 19% points from the average ATR of +12%. Given this data, A) What is the ATR range for 1 SD and 2 SDs? B) At 2 SDs, you have a ____% confidence level that losses next year will not be greater than ___%. (Show your calculations for both A and B.)
Suppose the next month rate of return on a portfolio (worth $1M) is distributed as follows. Return Rate -0.05 -0.03 -0.01 0.00 0.01 0.03 0.04 0.07 0.10 0.12 Probability 1% 1.5% 2.5% 5% 10% 20% 25% 20% 10% 5% What is the expected rate of return given that the return is known to be greater than or equal to 4%?
Consider a position consisting of 200,000 investment in asset A and 300,000 investment in asset B. Assume that the daily volatility of the assets are 1.5% and 1.8% respectively, and that coefficient of correlation between their returns is 0.4. What is the five day 95% VAR for the portfolio (given 95% confidence level represents 1.65 standard deviations on the left side of the normal distribution)?
The analysts at FNB forecasted that the return on DJIA index portfolio over the coming year will be 14%. The one year T-Bill rate is 6%. While examining the recent returns of the DJIA index, the analysts estimated that the variance of these returns will be 12.4%. What is the degree of the risk aversion for the average investor, assuming the average portfolio resembles the DJIA index
What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T? The risk-free rate is 6% and the market portfolio's return is 14%. Do you expect the investment to be a good one for the coming year if betas for the two portfolio components are 0.6 and 1.3, respectively?
A portfolio consists of two securities: a 90-day T-bill and the S&P/TSX Composite. The expected return on the T-bill is 4.5%. The expected return on the S&P/TSX Composite is 12% with a standard deviation of 20%. What is the portfolio standard deviation if the expected return for this portfolio is 15%?
A portfolio has a 4.0 percent chance of losing 15 percent or more according to the VaR when T = 1.This can be interpreted to mean that the portfolio is expected to have an annual loss of 15 percent or more once in every how many years?
What is the standard deviation of the returns of a portfolio that produced returns of -14%, 30%, and -19% over the last three years? (answer in percent, but without the percent sign, e.g. "7.25" is 7.25%)
Your portfolio has provided you with returns of 8.6 percent, 14.2 percent, -3.7 percent, and 12.0 percent over the past four years. respectively. What is the geometric average return for this period? a). 7.78%b). 5.99%c). 7.54%