A portfolio that combines the risk-free asset and the market portfolio has an expectedreturn of 6.2 percent and a standard deviation of 9.2 percent. The risk-free rate is 3.2percent, and the expected return on the market portfolio is 11.2 percent. Assume thecapital asset pricing model holds. What expected rate of return would a security earn if ithad a .37 correlation with the market portfolio and a standard deviation of 54.2percent? (Do not round intermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)

Formula for expected return is: E(r) = Rf + Beta(Rm - Rf)

Answered: A portfolio that combines the risk-free…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 20P

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Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation coefficient with the market of −0.3, and a beta coefficient of −1.5. Security B has an expected return of 12%, a standard deviation of returns of 10%, a correlation with the market of 0.7, and a beta coefficient of 1.0. Which security is riskier? Why?
You have observed the following returns over time: Assume that the risk-free rate is 6% and the market risk premium is 5%. What are the betas of Stocks X and Y? What are the required rates of return on Stocks X and Y? What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y?
Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an expected return of 18% and a standard deviation of 60%. The correlation coefficient between Stocks A and B is 0.2. What are the expected return and standard deviation of a portfolio invested 30% in Stock A and 70% in Stock B?
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent.The risk-free rate is 4 percent, and the expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. Compute and justify the expected rate of return would a security earn if it had a 0.45 correlation with the market portfolio and a standard deviation of 55 percent.
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 6.4 percent and a standard deviation of 9.4 percent. The risk-free rate is 3.4 percent, and the expected return on the market portfolio is 11.4 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .39 correlation with the market portfolio and a standard deviation of 54.4 percent? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
A portfolio manager creates the following portfolio: Security Security Weight Expected Standard Deviation 1 0.25 0.55 2 0.75 0.36 If the correlation of returns between the two securities is -0.10, the standard deviation of the portfolio is closest to 44%. 97%. 05%. 12%.
Suppose the risk-free rate is 6 percent and the market portfolio has an expected return of 12 percent. The market portfolio has a standard deviation of 7 percent. Portfolio Z has a correlation coefficient with the market of 0.35 and standard deviation of 6 percent. According to the capital asset pricing model, what is the expected return on portfolio Z a. 12.6 percent b. 7.8 percent c. 9.87 percent d. 12.05 percent
The following expected return and the standard deviation of current returns are known: Security (i) Expected Return Standard Deviation βi A 0.20 0.12 1.1 B 0.12 0.10 0.8 T-Bills 0.05 0 0 Market Portfolio 0.20 0.15 1 Required: Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and the market portfolio.
A portfolio has an average return of 14.4 percent, a standard deviation of 18.5 percent, and a beta of 1.96. The risk-free rate is 2.6 percent. What is the Sharpe ratio?
Assume that two securities, A and B, constitute the market portfolio, their proportions and variances are 0.39, 160, and 0.61, 340, respectively. The covariance of the two securities is 190. Estimate the systematic risk (beta) of the two securities. Note that the covariance of security-i with the market portfolio is simply the weighted average of the covariances of security-i with all the securities included in the market portfolio – the lesson you learned in the context of the bordered covariance matrix. Answer step by step.Do all part.Answer must be correct.
jordan's portfolio is comprised of the risk-free asset and the market index. what is the standard deviation of Jordan's portfolio that has a beta of 1.7 if the risk-free rate is 0.3%, the return on the market index is 7.2% and the standard deviation on the market index is 21%
The firm wishes to estimate the beta of a portfolio that consists of two assets X and Y. The investment manager of the firm has gathered the following information on the two assets. Securities Rate of Return Standard Deviation Beta X 20% 20% 1.5 Y 10% 30% 1.0 Risk free asset 5% Calculate: The beta of the portfolio if 75% of the funds are invested in Y and 25% in X The portfolio expected return and the portfolio beta if you invest 35 % in X, 45% in Y and 20 % in the risk-free asset Assuming the CAPM applies, if the market’s expected return is 13 percent, the risk free rate is 8% and stock X’s required rate of return is 16%, what is the stock’s beta coefficient?

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