The UIB company desires to construct a portfolio with 15% expectedreturn. The portfolio is to consist of some combination of security X andsecurity Y, which have the following expected returns, standarddeviations of returns, and betas:SecuritySecurityYMarketRisk freeXportfolioreturnExpected8%19%13%2%returnStandard6%15%4%deviationBeta0.941.501. Determine the beta of the portfolio.2. Should UIB invest in the portfolio. Justify.3. Compute the correlation between security Y and the market portfolio

Beta of portfolio indicates the systematic risk of the portfolio. Systematic risk is also known as…

Answered: The UIB company desires to construct a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 18P

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Similar questions

The UIB company desires to construct a portfolio with 15% expected return. The portfolio is to consist of some combination of security X and security Y, which have the following expected returns, standard deviations of returns, and betas: Security X 8% 6% 0.94 Security 19% 15% 1.50 Market portfolio 13% 4% Risk free return 2% Expected return Standard deviation Beta Determine the beta of the portfolio
The UIB company desires to construct a portfolio with 15% expected return. The portfolio is to consist of some combination of security X and security Y, which have the following expected returns, standard deviations of returns, Security X Security Y Market Risk free rate Expected return 8% 19% 13% 2% Standard deviations 6% 15% 4% Beta 0.94 1.5 1. Determine the beta of the portfolio2. Should UIB invest in the portfolio. Justify.3. Compute the correlation between security Y and the market portfolio.
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 portfolio
Write the equation of the Security Market Line (SML). Compute and draw theSML when the expected return of the NASDAQ index (market portfolio) is17% and the return to the risk-free asset is 7%
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. 4.500
Consider a treasury bill with a rate of return of 5% and the following risky securities:Security A: E(r) = .15; variance = .0400Security B: E(r) = .10; variance = .0225Security C: E(r) = .12; variance = .1000Security D: E(r) = .13; variance = .0625The investor must develop a complete portfolio by combining the risk-free asset with one of the securities mentioned above. The security the investor should choose as part of his complete portfolio to achieve the best Sharpe ratio would be?
The firm wishes to estimate the beta of a portfolio that consists of two assets X and Y. The investment manager of the firm has gathered the following information on the two assets. Securities Rate of Return Standard Deviation Beta X 20% 20% 1.5 Y 10% 30% 1.0 Risk free asset 5% Calculate: The beta of the portfolio if 75% of the funds are invested in Y and 25% in X The portfolio expected return and the portfolio beta if you invest 35 % in X, 45% in Y and 20 % in the risk-free asset Assuming the CAPM applies, if the market’s expected return is 13 percent, the risk free rate is 8% and stock X’s required rate of return is 16%, what is the stock’s beta coefficient?
Consider the following information for four portfolios, the market, and the risk-free rate (RFR): Portfolio Return Beta SD A1 0.15 1.25 0.182 A2 0.1 0.9 0.223 A3 0.12 1.1 0.138 A4 0.08 0.8 0.125 Market 0.11 1 0.2 RFR 0.03 0 0 Refer to Exhibit 18.6. Calculate the Jensen alpha Measure for each portfolio. a. A1 = 0.014, A2 = -0.002, A3 = 0.002, A4 = -0.02 b. A1 = 0.002, A2 = -0.02, A3 = 0.002, A4 = -0.014 c. A1 = 0.02, A2 = -0.002, A3 = 0.002, A4 = -0.014 d. A1 = 0.03, A2 = -0.002, A3 = 0.02, A4 = -0.14 e. A1 = 0.02, A2 = -0.002, A3 = 0.02, A4 = -0.14
give me step by step solution In the wonderland country, the return on the market portfolio is 14,45%, and standard deviation of market return is 12,1% and the risk free return is 2,65%. You may form a portfolio with the securities X, Y and Z with the following characteristics: parameters security x security y security z beta 0.96 1.07 1,95 total risk 38.5% 25.4% 23.8% protifolio weight 25% 40% 35% Which security has the lowest total risk? b) If the market return decrease 0,85%, which is the expected impact in security Y return? c) Determine the expected beta and expected return of the portfolio with weights as represented in the table above. d) Determine the unsystematic risk associated to security X
Suppose that the S&P 500, with a beta of 1.0, has an expected return of 13% and T-bills provide a risk-free return of 6%. a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) 0.25; (iii) 0.50; (iv) 0.75; (v) 1.0?
Consider a world where the CAPM holds for all securities. The risk-free rate is 1%, and the standard deviation of the market portfolio is 16%. Microsoft has a correlation of 0.7 with the market portfolio, an expected return of 15%, and a standard deviation of 24%. What is the risk premia on Intel, if it has a CAPM beta of 0.8? Group of answer choices 11.67% 15.54% 8.61% 13.33% 10.67%
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 Required: Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and the market portfolio.

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