Consider a portfolio with expected annual return of 21.1% and volatility of 38%. Determine an analytical VaR for one month at 5% for a portfolio worth $100 million. o a. $16,341,597.61 ob. $15,871,500.8 Oc. $14,987,243.87 od. $17,805,123.64 o e. $17,681,784.87

Consider a portfolio with expected annual return of 21.1% and volatility of 38%. Determine an analytical VaR for one month at 5% for a portfolio worth $100 million. o a. $16,341,597.61 ob. $15,871,500.8 Oc. $14,987,243.87 od. $17,805,123.64 o e. $17,681,784.87

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 8PROB

See similar textbooks

Related questions

Q: How much money should be invested in the risky asset to form a portfolio with an expected return of…

A: Portfolio: A portfolio represents a group of financial instruments or investments like equity…

Q: Suppose you have $2,000 to invest. The market portfolio has an expected return of 10.5 percent and a…

A: Let the weight in Risk free Asset be A Therefore, weight in market portfolio be 1-A

Q: Currently, the risk-free return is 4 percent, and the expected market rate of return is 14 percent.…

A: We will first find the beta of the portfolio. Portfolio beta = weighted average of betas of…

Q: Using the information below to calculate the following monthly returns for the portfolio.…

A: Return is a rate at which investment grows in different periods.

Q: You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000…

A: Capital asset pricing model: This model describes the relationship of the expected return of the…

Q: A portfolio consists of $15 million of asset A (for which annual expected return is 10% and annual…

A: Volatility of returns of a portfolio containing three assets Volatility is measured in terms of…

Q: A portfolio is invested 25 percent in Stock G, 55 percent in Stock J, and 20 percent in Stock K. The…

A: The expected return from the portfolio is calculated by multiplying the probability by its…

Q: Suppose a bond fund has an initial portfolio value of $100 million. The following table provides the…

A: Doller weighted return Doller weighted rate of return is a measure to identify the performance of an…

Q: -10 We have the following information on a portfolio consisting of Stocks A, B, and C:…

A: The question is related to the Portfolio Management. The Portfolio weight will be calculated by…

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: What is the expected return for the following portfolio? (State your answer in percent with two…

A: The question is related to Expected Return of Portfolio. The expected return of Portfolio is…

Q: EXPECTER RETURN OF A PORTFOLIO please see attatch file

A: Expected return on portfolio is sum of weighted return on individual stocks

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

A: Given:

Q: Stock X, Stock Y, and the market have had the following returns over the past four years. Year 2018…

A: Required return: It refers to the return that is received by an investor on his investment. It is…

Q: Tyler Trucks stock has an annual return mean and standard deviation of 10 percent and 26 percent,…

A: Monthly Return on portfolio and Monthly Combined standard deviation of portfolio is need for…

Q: Your portfolio consists of Php100,000 invested in a stock that has a beta = 0.8, Php150,000 invested…

A: Market risk premium is required to find the required rate of return. Hence, the market risk premium…

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: Calculate the effect of your strategy on the fund manager’s returns if the level of the market in…

A: In order to hedge the risk in the portfolio value of $55 million, the fund manager uses a 6-month…

Q: The change in the value of a portfolio in 10 days is normally distributed with a mean of (i)…

A: Given: Situation 1. Change in Value in 10 days/ mean of the loss = GHS500,000 Standard deviation =…

Q: Portfolios A and B are actively managed. Based on current dividend yields and expected capital gains…

A: given, ra=10%rb=17%betaa=0.5betab=1.4rf=2%rm=12%σa=26%σb=35%σm=21%

Q: Currently the risk-free return is 3 percent and the market risk premium is 8 percent. What is the…

A: Risk-free rate = 3% Market risk premium = 8% According to CAPM: Required return = Risk-free rate +…

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: . Give 3 limitations of VaR.

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Your portfolio consists of the following investmentin stock with corresponding beta: P100,000 in a…

A: We have the portfolio with different values of stocks and different betas. We need to calculate the…

Q: What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T?…

A: Return of Stock S = (0.25 * 30%) + ( 0.5 * 15% )+ (0.25 * -10%) = 7.5 + 7.5 - 2.5 = 12.5 Return of…

Q: If Expected return of stock A is 12%, Expected return of stock B is 15% and Expected return of stock…

A: Expected Portfolio or the overall rate of return of Portfolio is the total return which is generated…

Q: Portfolio Expected Return. You own a portfolio that has $2,750 invested in Stock A and $3,900…

A: In this question we are required to calculate expected return of our portfolio having two stocks…

Q: a) Assume that you bought 200 stock B in your portfolio for total investment of $1200, now the…

A: a) Capital Gain on the stock is computed as follows: Price per share=Total InvestmentNo. of…

Q: Your portfolio consists of the following investment in stock with corresponding beta: · P200,000 in…

A: Weight in stock 1 = [200000 / (200000 + 100000 + 100000)] = 0.5 Weight in stock 2 = [100000 /…

Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…

A: Expected return means return which investor expect from the investment in portfolio. Variance shows…

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: 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: Below are the annual returns provided by TSCM. Calculate average annual return experienced by an…

Q: Suppose the next month rate of return on a portfolio (worth $1M) is distributed as follows. Return…

A: Using excel

Q: Data are given as follows: (all the values are in percent) Month Average portfolio return market…

A: Sharpe ratio: It is a measure of the excess return earned to compensate for the volatility of…

Q: \ssume that you are working for nk and you have a portfolio with market valuation of £25,000,000 at…

A: We have to calculate the daily volatility.

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…

Q: 2-10 We have the following information on a portfolio consisting of Stocks A, B, and C:…

A: We need to find the market values of A, B and C first.

Q: George Stephenson's current portfolio of $2 million is invested as follows Summary of Stephenson's…

A: Stephen’s current portfolio has an annual expected return of 13.8% with an annual standard deviation…

Q: portfolio had a Sharpe measure of ___

A: The risk-return ratio is known as the Sharpe Ratio. It is a measure of return generated over and…

Q: ou invest $3,000 in a complete portfolio. The complete portfolio is composed of a risky asset with…

A: The standard deviation of a portfolio measures the inherent risk of investing in the portfolio. It…

Q: Consider a position consisting of 200,000 investment in asset A and 300,000 investment in asset B.…

A: Variance and standard deviation of a portfolio of two assets With weight of asset A (WA), weight of…

Q: The rate on six-month T-bills is currently 5%. Andvark Company stock has a beta of 1.69 and a…

A: Risky stock is a stock which has higher risk as compared to the risk on the market portfolio. A…

Q: Stock Investment Expected Return A $ 5,000 12% B 10,000 10 C 15,000 14

A: The expected return for an investment portfolio is the weighted average of the expected return of…

Question

Consider a portfolio with expected annual return of 21.1% and volatility of 38%. Determine an
analytical VaR for one month at 5% for a portfolio worth $100 million.
o a. $16,341,597.61
o b. $15,871,500.8
Oc. $14,987,243.87
o d. $17,805,123.64
o e. $17,681,784.87

Expert Solution

This question has been solved!

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

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step by step

Solved in 4 steps with 3 images

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

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?
What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share). Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero). Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).
2-11 We have the following information on a portfolio consisting of Stocks A, B, and C: A B C Expectd annual return 25% 20% 15% Standard Deviation of Return 35% 30% 25% Price per share 100 85 75 # shares 100,000 150,000 200,000 correlation coefficient (A,B) 0.5 correlation coefficient (A,C) 0.2 correlation coefficient (B,C) .8 number of days per year 365…
A portfolio consists of $15,000 in Stock M and $22,900 invested in Stock N. The expected return on these stocks is 8.80 percent and 12.40 percent, respectively. What is the expected return on the portfolio?
What is the expected return for the following portfolio? (State your answer in percent with two decimal places.) Stock Expected returns Investment AAA 35% $500,000 BBB 29% $1,300,000 CCC 18% $1,200,000 DDD 7% $1,500,000 O.17.13% O.19.40% O.21.01% O.22.21% O.23.88%
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)?
2-10 We have the following information on a portfolio consisting of Stocks A, B, and C: A B C Expectd annual return 25% 20% 15% Standard Deviation of Return 35% 30% 25% Price per share 100 85 75 # shares 100,000 150,000 200,000 correlation coefficient (A,B) 0.5 correlation coefficient (A,C) 0.2 correlation coefficient (B,C) .8 number of days per year 365…
Consider a portfolio consisting of $ 10 million invested in the S&P 500 and $ 7.5 million invested in U.S treasury bonds. The S&P 500 has an expected return of 14% and a standard deviation of 16%. The treasury bonds have an expected return of 9% and a standard deviation of 8%. The correlation between the S&P 500 and Bonds is 0.35. All figures are stated on an annual basis. Find the VAR for one year at a probability of 5%. Identify and use the most appropriate method given the information you have. Using the information, you obtained in part a, find VAR for one day.
N1 Consider a portfolio consisting of stocks and treasury bills. The expected return on the stocks is 25%, and the standard deviation is 30%. The expected return on the treasury bills is 1%, and treasury bills are risk free. All of these figures are annual. The portfolio's market value is $200 million and is allocated 90% to stocks and 10% to treasury bills. Determine the 1% annual VaR and the 1% weekly VaR using the analytical method.
2-9 We have the following information on a portfolio consisting of Stocks A, B, and C: A B C Expectd annual return 25% 20% 15% Standard Deviation of Return 35% 30% 25% Price per share 100 85 75 # shares 100,000 150,000 200,000 correlation coefficient (A,B) 0.5 correlation coefficient (A,C) 0.2 correlation coefficient (B,C) .8 number of days per year 365 What…
Stock A has an expected return of 10 percent per year and Stock B has an expected return of 30 percent. If 40 percent of a portfolio's funds are invested in Stock A and the rest in Stock B, what is the expected return on the portfolio of Stock A and Stock B? Multiple Choice 16 percent 26 percent 22 percent 20 percent
Currently the risk-free return is 3 percent and the market risk premium is 8 percent. What is the required rate of return on the following two-stock portfolio? Amount Invested Beta $70,000 1.4 $30,000 0.4