SUBJECT: financial and management application I need the answer quickly QUESTION: Realizing the benefits of diversification you have invested in the following securities: United Chubb Chase Expected return Standard deviation of return 12% 14% 9% 3% 5% 3% Beta 1.65 1.2 0.89 Amount invested in each $50,000 1. Compute the expected rate of rèturn on the portfolio, and the beta of the security $125,000 $75,000 portfolio
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- (Capital asset pricing model) Grace Corporation is considering the following investments. The current rate on Treasury bills is 2.5 percent and the expected return for the market is 9 percent. Stock Beta K 1.06 G 1.28 B 0.78 U 0.93 (Click on the icon in order to copy its contents into a spreadsheet.) a. Using the CAPM, what rates of return should Grace require for each individual security? b. How would your evaluation of the expected rates of return for Grace change if the risk-free rate were to rise to 4 percent and the market risk premium were to be only 6 percent? c. Which market risk premium scenario (from part a or b) best fits a recessionary environment? A period of economic expansion? Explain your response. Question content area bottom Part 1 a. The expected rate of return for security K, which has a beta of 1.06, is enter your response here%. (Round to two decimal places.) Part 2 The expected rate…You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000 invested in Treasury Securities (assume risk-free), and $12000 invested in an index fund tracking the market. According to surveys, the expected market risk premium is 6.6%, risk free rate is 1.3%. What is the expected return of this portfolio according to CAPM? Answer in percent, rounded to one decimal place.You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000 invested in Treasury Securities (assume risk-free), and $12000 invested in an index fund tracking the market. According to surveys, the expected market risk premium is 6.6%, Risk-free rate is 1.3%. What is the expected return of this portfolio according to CAPM?
- Calculate the required rate of return for the Wagner Assets Management Group, which holds 4 stocks. The market's required rate of return is 17.0%, the risk-free rate is 7.0%, and the Fund's assets are as follows: Stock Investment Beta A $200,000 1.50 B 300,000 −0.50 C 500,000 1.25 D 1,000,000 0.75 Select the correct answerThe 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 portfolioQuestion 7 The Amelia Knight investment fund has a total capital of R120 000 invested in three shares: SharesReturnInvestedTechnological Sector25%R60 000Education Sector13%R30 000Mining Sector20%R30 000 The current risk-free rate is 5,5%. Market returns have the following estimated probability distribution for the next period: ProbabilityMarket return0,3–10%0,1 14%0,2 15%0,4 18% What is the beta coefficient of the investment fund? 1. 0,52 2. 0,80 3. 1,82 4. 4,92
- A firm of investment looking for optimal investment portfolio for its client The client wants to invest a total of 10 million SEK at most and demands the maximum tum. The proposal is to invest in stocks with an expected return of 1% pa. in bonds with an expected return of 6% pa and into share certificates with an expected yield of 7% pa . The investment tim rated the riskiness of the investment in stocks 9 points per invested Krona in bonds 8 points per invested Krona and in share certificates 5 points per invested Krona , and the cient does not want the riskiness of the investment to exceed the limit of 80 million points. At the same time, the liquidity of the investment in stocks was rated 4 points per invested Krona in bonds, 3 points per invested Krona and in share certificates 1 points per invested Krona , and the client wants the total liquidity of the investment to at least 20 million points . Find optimal portfolio for the client ?Assume that the CAPM is true, Rf = 5%, Rm= 15% σm = 0.1. An investor with $10,000 to invest builds a portfolio, Q, of T-bills and the market portfolio. This means that: a) it would be possible for the investor to obtain a return of 17% on portfolio Q b) if portfolio Q were composed of short-selling $2,000 in T-bills and the remainder is the market portfolio, then Pqm = 1, βq = 1.2 and σq = 0.12 c) to obtain a return of 17% from portfolio Q the investor would need to invest $12,000 in the market portfolio d) all of the above are true e) only a) and b) above are true. Pls show procedure, thanksAssume that you have just received information from your investment advisor that your portfolio has reached a value of $1,250,000. Your portfolio consists of three stocks, as follows: Stock Amount Invested % of Total Beta A $250,000 20% 1.12 B $400,000 32% .85 C $600,000 48% .55 Total: $1,250,000 100% Calculate the beta of this investment portfolio. Assume that the expected market return ( r m ) is 9 percent and the expected risk- free rate ( RF ) is 2 percent. What is the expected return ( r j ) for this investment portfolio?
- 2. Mr. Morgan is planning to invest £20m in one of two following portfolios. Both portfolios consist of four securities from various industries. The correlation between the returns of the individual securities is thought to be close to zero. Portfolio A investments Equity beta Expected return (%) Amount invested (£m) 1 1.6 18 4 2 0.2 5 6 3 0.6 7 7 4 1 10 3 Portfolio B investments Equity beta Expected return (%) Amount invested (£m) 1 1.4 11 3 2 0.8 10 5 3 0 4.5 7 4 0.4 6 5 QUESTION: (a) Mr. Morgan decides to use the capital asset pricing model (CAPM) to compare the portfolios. The current market return is estimated to be 10 per cent and the rate on Treasury bills is 4.5 per cent. Using the information provided, recommend which one should be selected.You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock Investment Beta A $222,000 1.41 B 333,000 0.53 C 555,000 1.30 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 12 percent and that the risk-free rate is 7 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.) Beta of the portfolio enter the beta rounded to 3 decimal places Expected rate of return enter percentages rounded to 2 decimal places %A portfolio worth $5,500 is invested in Stocks A and B plus a risk-free asset. A total of $2,500 is invested in Stock A with a beta of 1.27. Stock B has a beta of .89. How much needs to be invested in Stock B if the goal is to create a portfolio that will mimic the entire market? Multiple Choice $1,482.08 $3,408.15 −$894.20 $2,266.67 $2,612.36