Risk and Rates of Return; Risk in Portfolio Context holding a partfilio with the following You are investments and betas: Stock A B C D Total Investament Dollar Investment $250,000 150,000 400,000 200,000 $1,000,000 Beta 1.20 1.60 0.85 -0.15 The market's required return is 11% and the risk-free rate is 4%. What is the portfolio's required return? Round decimal places. your answer to three
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- The following portfolios are being considered for investment. During the period under consideration, RFR = 0.08. Portfolio Return Beta σi P 0.14 1.00 0.05 Q 0.20 1.30 0.11 R 0.10 0.60 0.03 S 0.17 1.20 0.06 Market 0.12 1.00 0.04 Compute the Sharpe measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Sharpe measure P Q R S Market Compute the Treynor measure for each portfolio and the market portfolio. Round your answers to three decimal places. Portfolio Treynor measure P Q R S MarketState whether the Portfolio Nature is Defensive/Aggressive. Weight on XOM Weight on PFE Portfolio Return Portfolio Beta Portfolio Standard Deviation**** Portfolio Nature: Defensive/Aggressive 0 1 -0.0016 0.2854 0.0439 0.1 0.9 -0.0025 0.3069 0.0420 0.2 0.8 -0.0034 0.3285 0.0408 0.3 0.7 -0.0044 0.3501 0.0405 0.4 0.6 -0.0053 0.3717 0.0410 0.5 0.5 -0.0063 0.3932 0.0424 0.6 0.4 -0.0072 0.4148 0.0445 0.7 0.3 -0.0081 0.4364 0.0472 0.8 0.2 -0.0091 0.4579 0.0504 0.9 0.1 -0.0100 0.4795 0.0541 1 0 -0.0110 0.5011 0.0582Consider a portfolio consisting of the below securities with the below characteristics: Security Amount Invested($) Beta Expected Return A 1,5 MIL 1.0 12.0%B 1.0 MIL 1.5 13.5%C 2.0 MIL 0.8 9.0% Required:a) Calculate the portfolio’s Beta. b) Calculate the portfolio’s expected return. c) Discuss the Capital Asset Pricing Model (CAPM) explaining what it is used forand which are its limitations.
- The following data are available to you as portfolio manager: Security Estimated return (%) Beta A 40 3.0 B 35 2.5 C 30 1.0 D 17.5 1.8 E 20.0 1.5 Market Index 25 2.0 Government Security 17 0 In terms of the security market line, which of the securities listed above are underpriced? Assuming that a portfolio is constructed using equal proportions of the five securities listed above, calculate the expected return and risk of such a portfolioThe 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 0.8T-Bills 0.05 0 0Market Portfolio 0.20 0.15 1 a) Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and the market portfolio. b) Determine which of A or B is over-valued or undervalued. c) How will you invest $1000 in riskless T-bills and the risky assets in the Market Portfolio to maintain a standard deviation of 10%. Pls show procedure, thanksPortfolio Management A particular firm’s portfolio is composed of two assets, which we will call" A" and "B." Let X denote the annual rate of return from asset A, and let Y denote the annual rate of return from asset B. Suppose that E(X) = 0.15, E(Y) = 0.20, SD (X) = 0.05, SD (Y) = 0.06, and CORR (X, Y) = 0.30. (a) What is the expected return of investing 50% of the portfolio in asset A and 50% of the portfolio in asset B? What is the variance of this return? (b) Replace CORR (X, Y) = 0.30 by CORR (X, Y) = 0.60, 0, -0.30, and -0.60 and answer the questions in part (a). What is the impact of correlation on the expected returns and its variance? Explain why this is so. (c) Suppose that the fraction of the portfolio that is invested in asset B is f, and so the fraction of the portfolio that is invested in asset A is (1 – f). Let f vary from f = 0.0 to f = 1.0 in increments of 5% (that is, f = 0.0, 0.05, 0.10, 0.15, ...), and compute the mean and the variance of the annual rate of…
- 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%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 a) Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and the market portfolio. b) Determine which of A or B is over-valued or undervalued. c) How will you invest $1000 in riskless T-bills and the risky assets in the Market Portfolio to maintain a standard deviation of 10%.Consider a portfolio comprise of three securities in the following proportion and with the indicated securities beta. Security Amount Invested Beta Expected return A 1.5million 1.0 12% B 1million 1.5 13.5% C 2million 0.8 9% Calculate the portfolio’s; Beta Expected return Determine whether this portfolio have more or less systematic risk than an average asset.
- Suppose we have the following information: Securit Amount Invested Expected Return Beta Stock A RM1 ,OOO 8% 0.80 Stock B RM2,OOO 12% 0.95 Stock C RM3,OOO 15% 1.10 Stock D RM4,OOO 18% a) Compute the expected return on this portfolio. b) Calculate the beta of the portfolio. c) Does this portfolio have more or less systematic risk than an average asset? Explain.Portfolio Risk and Return: You are given the following distributions of returns for assets (single stock or portfolio) A, B, and C. Economic Conditions Probability Return on asset A B C Boom .30 60% 50% 10% Normal .40 40 30 50 Bust .30 20 10 90 Find the expected return (think of this as the mean return) and standard deviation of B and C. (A’s expected return is 40% and its standard deviation is 15.49%)Pick the best answer to the following portfolio? (Round off all numbers to 2 decimal places) Stock Amount Invested Beta A $6,700 1.16 B 3,000 1.23 C 8,500 0.79 Group of answer choices The portfolio has more systematic risk than the market. The portfolio has more total risk than the market. The portfolio has no systematic risk. The portfolio has same systematic risk as the market. The portfolio has less systematic risk than the market.