One of our clients, Mr. Lee, currently has an investment portfolio value of $1mil. His portfolio consists of 70% risky portfolio and 30% risk-free asset. If Mr. lee has now extra $100,000 cash to invest, and if he is a constant relative risk aversion, how do you think he wants to allocate his extra $100,000 over the risky and the risk-free asset?
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One of our clients, Mr. Lee, currently has an investment portfolio value of $1mil. His portfolio consists of 70% risky portfolio and 30% risk-free asset.
If Mr. lee has now extra $100,000 cash to invest, and if he is a constant relative risk aversion, how do you think he wants to allocate his extra $100,000 over the risky and the risk-free asset?
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- As a junior investment manager, your boss instructs you to help a client to invest $100,000for the next year. Particularly, you are asked to form an investment portfolio for the clientby investing in risk-free assets like 90-day bank bill and two stocks: A and B. Stock A hasa beta value of 0.8, an expected return of 7% and a standard deviation of 10%; and stockB has a beta value of 1.2, an expected return of 12% and a standard deviation of 15%.The correlation coefficient between the returns for the two stocks is 0. The risk-free rate is2%.(a) What is the expected return of the risky portfolio with the two stocks that has theleast amount of risk?(b) Suppose that the optimal risky portfolio with the two stocks has a weight of 53% inA and 47% in B, and has the expected return of 9.4% and standard deviation of8.8%. If this client is willing to take a risk measured by standard deviation of 5% forhis overall investment portfolio, how much would you recommend to the client toinvest in the…As a junior investment manager, your boss instructs you to help a client to invest $100,000 for the next year. Particularly, you are asked to form an investment portfolio for the client by investing in risk-free assets like 90-day bank bill and two stocks: A and B. Stock A has a beta value of 0.8, an expected return of 7% and a standard deviation of 10%; and stock B has a beta value of 1.2, an expected return of 12% and a standard deviation of 15%. The correlation coefficient between the returns for the two stocks is 0. The risk-free rate is 2%. (a) What is the expected return of the risky portfolio with the two stocks that has the least amount of risk? (b) Suppose that the optimal risky portfolio with the two stocks has a weight of 53% in A and 47% in B, and has the expected return of 9.4% and standard deviation of 8.8%. If this client is willing to take a risk measured by standard deviation of 5% for his overall investment portfolio, how much would you recommend to the client to…Dakota & Munroe invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.21 and a T-bill with a rate of return of 0.045. The firm's goal is to form a client portfolio that has an expected return of $ 114. Given this information , how can the firm accomplish it goal?
- Jason currently has all of his wealth in Treasury bills. He is consideringinvesting 70% of his funds in Boeing, whose beta is 1.47, with theremainder left in Treasury bills. Boeing has an expected return of14.78% and Treasury bills have an expected return of 2%. What areJason’s portfolio beta and portfolio expected return?The investor has R50,000 to invest A, B and C. R12,000 will be invested into asset A. The beta for asset A and asset B is 0.90 and 1.2 respectively. Asset C represents the risk-free asset. If the investor envisages a portfolio equally as risky as the market, how much should be invested into asset B? A. 32677 B. 32676 C. 32667 D. 32678You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are as follows: Years Cash Flow 0 –100 1–10 + 15 On the basis of the behavior of the firm’s stock, you believe that the beta of the firm is 1.34. Assuming that the rate of return available on risk-free investments is 5% and that the expected rate of return on the market portfolio is 14%, what is the net present value of the project?