Congratulations! Your portfolio returned 12.9% last year, 2.4% better than the market return of 10.5%. Your portfolio had a standard deviation of earnings equal to 17%, and the risk-free rate is equal to 3.9%. Calculate Sharpe's measure for your portfolio. If the market's Sharpe's measure is 0.36, did you do better or worse than the market from a risk/return perspective?
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- A portfolio returned 11% last year, 2% better than the market return of 9%. the portfolio’s return had a standard deviation equal to 18%, and the risk-free rate is 3%. Calculate Sharpe’s measure for the portfolio. If the market’s Sharpe’s measure is 0.3, will it be better or worse than the market from a risk/return perspectiveUsing the data in the table, consider a portfolio that maintains a 35% weight on stock A and a 65% weight on stock B. a. What is the return each year of this portfolio? (2010-2015) b. Based on your results from part (a), compute the average return and volatility of the portfolio. c. Show that (i) the average return of the portfolio is equal to the (weighted) average of the average returns of the two stocks, and (ii) the volatility of the portfolio equals the same result as from the calculation in Eq. 11.9. d. Explain why the portfolio has a lower volatility than the average volatility of the two stocks.Recently, Kellie determined that the required rate of return for Stock Q is 11 percent. In her analysis she determined that the risk-free rate of return, r is 4 percent and that the required return on the market portfolio, r is 9 percent. Today, however, Kellie received new information that indicates the market risk premium, RP is actually 1 percent higher than she estimated in her original analysis. Based on this new information, what should be the required rate of return for Stock Q?
- You are given the following data: Risk-free rate is 4.1 percent, market return is 6.5 per cent, and market volatility is 12.2 per cent. The return of a portfolio is 11 per cent, its volatility is 15.2214 per cent, and its beta is 0.7. Calculate the measure called the Information ratio. A. 0.193 B. 0.414 C. 0.548 D. 4.500Here are some historical data on the risk characteristics of Ford and Harley Davidson. Ford Harley Davidson β (beta) 1.26 0.69 Yearly standard deviation of return (%) 30.9 16.9 Assume the standard deviation of the return on the market was 12.0%. a. The correlation coefficient of Ford’s return versus Harley Davidson is 0.27. What is the standard deviation of a portfolio invested half in each share? b. What is the standard deviation of a portfolio invested one-third in Ford, one-third in Harley Davidson, and one-third in risk-free Treasury bills? c. What is the standard deviation if the portfolio is split evenly between Ford and Harley Davidson and is financed at 50% margin, that is, the investor puts up only 50% of the total amount and borrows the balance from the broker? d-1. What is the approximate standard deviation of a portfolio composed of 100 stocks with betas of 1.26 like Ford? d-2. What is the approximate standard deviation of a portfolio composed of…A portfolio returned 13% last year, with a beta equal to 1.5. The market return was 10%, and the risk-free rate was 4%. Did the person earn more or less than the required rate of return on your portfolio? (Use Jensen’s measure.)
- During the past 5-year, the monthly average return and standard deviation of Netflix (NFLX) stock were 3.5% and 10%, respectively. For the same period, the monthly average return and standard deviation of Verizon (VZ) were 0.6% and 4.6%, respectively. The correlation between NFLX and VZ was -0.1. Assume that the monthly risk-free rate is 0.1%. ) What is the Sharpe ratio for NFLX? What is the Sharpe ratio for VZ? Show your calculation steps briefly and clearly. Find the minimum-variance portfolio (MVP), i.e., the weight of NFLX and VZ in the MVP. You do not need to show your calculation steps for this subquestion. Find the optimal risky portfolio P*, i.e., the weight of NFLX and VZ in P*. You do not need to show your calculation steps for this subquestion. Calculate the Sharpe ratio for the optimal risky portfolio P*. Verify that P* offers a higher Sharpe ratio than NFLX and VZ.Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 38% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 5%. Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index with weights as shown below. (Enter your answers as decimals rounded to 4 places. Leave no cells blank - be certain to enter "0" wherever required.) WBills: WIndex: Expected Return: Variance: 0.0 1.0 0.1300 0.1444 Example 0.2 0.8 0.4 0.6 0.6 0.4 0.8 0.2 1.0 0.0A portfolio with a 25% standard deviation generated a return of 15% last year when T-bills were paying 4.5%. This portfolio had a Sharpe measure of ____.
- The stock of Jones Trucking is expected to return 16 percent annually with a standard deviation of 7 percent. The stock of Bush Steel Mills is expected to return 21 percent annually with a standard deviation of 13 percent. The correlation between the returns from the two securities has been estimated to be +0.4. The beta of the Jones stock is 1.1, and the beta of the Bush stock is 1.4. The risk-free rate of return is expected to be 6 percent, and the expected return on the market portfolio is 16 percent. The current dividend for Jones is $5. The current dividend for Bush is $7. What is the expected return from a portfolio containing the two securities if 30 percent of your wealth is invested in Jones and 70 percent is invested in Bush? Round your answer to one decimal place. % What is the expected standard deviation of the portfolio of the two stocks? Round your answer to two decimal places. % Which stock is the better buy in the current market? Round your answers to one decimal…The stock of Jones Trucking is expected to return 16 percent annually with a standard deviation of 7 percent. The stock of Bush Steel Mills is expected to return 21 percent annually with a standard deviation of 13 percent. The correlation between the returns from the two securities has been estimated to be +0.4. The beta of the Jones stock is 1.1, and the beta of the Bush stock is 1.4. The risk-free rate of return is expected to be 6 percent, and the expected return on the market portfolio is 16 percent. The current dividend for Jones is $5. The current dividend for Bush is $7. What is the expected return from a portfolio containing the two securities if 30 percent of your wealth is invested in Jones and 70 percent is invested in Bush? Round your answer to one decimal place. % What is the expected standard deviation of the portfolio of the two stocks? Round your answer to two decimal places. % Which stock is the better buy in the current market? Round your answers to one decimal…Suppose you owned a portfolio consisting of $250,000 of long-term U.S. government bonds. Would your portfolio be riskless? Explain. What is the least risky security you can think of? Explain. Stock A has an expected return of 7%, a standard deviation of expected returns of 35%, a correlation coefficient with the market of −0.3, and a beta coefficient of −0.5. Stock B has an expected return of 12%, a standard deviation of returns of 10%, a 0.7 correlation with the market, and a beta coefficient of 1.0. Which security is riskier? Why?
