Bill formed his optimal complete portfolio worth $1000 out of 2 assets: A T-bill with a return of 5%, and a risky portfolio P with an expected return of 15% and a return volatility of 20%. Bill's coefficient of risk aversion is 2. Which of the following statements is true about Bill's optimal complete portfolio? O Bill invests nothing in the risky portfolio P. Bill buys $500 worth of the T-bill. O Bill invests $1000 in the risky portfolio. O Bill borrows $250 at the risk free rate.
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- N2 10. There is a risky portfolio of multiple stocks with an expected return of 14% and a standard deviation of 21%. Jason invests 65% of his total wealth on this risky portfolio and the rest 35% on Treasury bills (so, he has constructed a ‘complete portfolio’ of a risky asset and a risk-free asset). One-year T-bill rate is 3%. a. Calculate the expected return and standard deviation of his complete portfolio b. Calculate his risk premium of the risky portfolio as well as of the complete portfolio c. Compute the Sharpe ratio d. Draw the capital allocation lineCh 13] Julia has $5,000.00 to invest in a portfolio. She will build the portfolio from threeassets: Stock A with an expected return of 16.0% and a standard deviation of 42% Stock B with an expected return of 12.0% and a standard deviation of 32% T-Bills with an expected return of 4.00% and a standard deviation of 0%.Assume that she can short sell T-bills, the risk-free asset (or borrow at the risk-free rate).Assume also that she will invest the same amount in Stock A and Stock B. How muchmoney will she invest in Stock A if her goal is to create a portfolio with an expected returnof 20.00%.$(to nearest $0.01)Question 6 Suppose that an investor has £1,000,000 to invest in a portfolio containing stocks A, B and a risk-free asset. The investor must invest all her money, and she is using the Capital Asset Pricing Model (CAPM) to make predictions of the expected return-beta relationship. Her objective is to create a portfolio that has an expected return of 14% and which has a beta of 0.75. If stock A has an expected return of 30% and a beta of 1.9, stock B has an expected return of 20% and a beta of 1.4, and the risk-free rate is 8%, how much money will she invest in stock A? Explain your answer and show your calculations.
- You invest $1,000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04.What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.11? A. 62.5% and 37.5% B. 53.8% and 46.2% C. Cannot be determined. D. 75% and 25% E. 46.2% and 53.8%Michael trades T-bills with the annual rate of return equal to 2% and TD stock. The expected rate of return and standard deviation of the rate of return of TD stock are equal to 12% and 25%, respectively . The coefficient of risk aversion of Michael is 2. What is a standard deviation of his optimal portfolio? a. 40% b. 20% c. 25% d. 10% e. 15%Quantitative Problem: You are holding a portfolio with the following investments and betas: Stock Dollar investment Beta A $250,000 1.30 B 100,000 1.70 C 400,000 0.70 D 250,000 -0.20 Total investment $1,000,000 The market's required return is 11% and the risk-free rate is 4%. What is the portfolio's required return? Do not round intermediate calculations. Round your answer to three decimal places. ? %
- 7.a. You manage a risky portfolio with E(r) =18% and σ = 28%. The T-Bill rate is 8%. Your client chooses to invest 70% of a portfolio in your funds and 30% in T-Bill funds. Calculate the Expected return and standard deviation of your client’s portfolio.b. Suppose that your risky portfolio includes the following investments in the given proportions:Stock AStock BStock C25%32%43%c. What is the Sharpe ratio of your risky portfolio? Your client’s?d. Draw the CAL of your portfolio. What is the slope of the CAL? Show the position of your client on your fund’s CALYou invest $10,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 15% and a standard deviation of 21% and a treasury bill with a rate of return of 5%. How much money should be invested in the risky asset to form a portfolio with an expected return of 11%? A. $6,000B. $4,000C. $7,000D. $3,000Problem 11-23 Analyzing a Portfolio You want to create a portfolio equally as risky as the market, and you have $2,400,000 to invest. Given this information, fill in the rest of the following table: (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Asset Investment Beta Stock A $360,000 1.00 Stock B $624,000 1.10 Stock C 1.20 Risk-free asset
- (a)As an investor, you are holding the following investments: Stock Amount invested beta A $40 million 1.4 B $30 million 1.0 C $60 million 0.8 You are planning to sell the holdings of Stock B. The money from the sale will be used topurchase another $20 million of Stock A and another $10 million of Stock C. The risk-free rateis 7 percent and the market risk premium is 6.5 percent. How many percentage points higherwill the required return on the portfolio be after you complete this transaction?Question 1 e) As a risk averse investor Lawrence will only invest in the portfolio if it has a coefficient of variation that is below 0.75. Should Lawrence invest in the portfolio, please provide reason(s) to support your response? f) Assume in 2020 the estimated rate of return of the T&T Stock Exchange Composite Index for the upcoming year was 8%, and the estimated return on a 1-year treasury note for the upcoming year was 2%. Using the beta of each security shown in Table 1 above and the market expected returns calculate an expected rate of return for each securityQUESTION 7 An investor wishes to construct a portfolio consisting of a 70 percent allocation to a stock index and a 30 percent allocation to a risk-free asset. The return on the risk-free asset is 4.5 percent, and the expected return on the stock index is 12 percent. Calculate the expected return on the portfolio. a. 16.50 percent b. 17.50 percent c. 14.38 percent d. 9.75 percent e. 8.25 percent