Answered: Use the data below to answer the…

Use the data below to answer the following question. If you have a risk-aversion factor of 2.5 and the risk-free rate is 2%, you would invest _______% of your money in the risky portfolio.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the…

A: Particulars Asset A…

Q: Assume the riskless rate of interest is 2% per year, and the expected rate of return on the market…

A: The expected return is the profit margin or loss that an investment may anticipate by the investor.…

Q: The UIB company desires to construct a portfolio with 15% expected return. The portfolio is to…

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

Q: If the risk free rate is 2 %, the expected return on the market portfolio is 12% and the beta of…

A: Financial statements are statements which states the business activities performed by the company .…

Q: The optimal risky portfolio has an expected return of 15% and a standard deviation of 10%. The…

A: Optimal risky portfolio is suitable to risk averse investors who want to minimise their investment…

Q: Assume that you manage a risky portfolio with an expected rate of return of 14% and a standard…

A: a.Calculation of Proportion y:The Proportion y is 87.50%.

Q: A portfolio consists of assets with the following expected returns (refer to image): a. What is the…

A: A portfolio refers to the mixture of different kinds of funds and securities for the investment.

Q: You observe the following: ABC Inc. has 1.8 Beta and .2 Expected return XYZ Inc has 1.6 Beta and .19…

A: The required rate of return for a firm depends on the risk free rate, beta and market premium. Beta…

Q: Consider the following two investment alternatives: First, a risky portfolio that pays a 15% rate of…

A: Given: Return Probability 15% 40% 5% 60%

Q: You compute the optimal risky portfolio to have the expected return of 12% and standard deviation of…

A: Here, Expected Return of Portfolio is 12% Standard Deviation is 20% Risk-free rate is 4% Risk…

Q: During the same year, the risk-free rate was 5% and the return on the m portfolio was 12%. (1) What…

A: Return on portfolio and beta of portfolio can be calculated by weighted average return and beta of…

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: The market index return is 1.3% and its standard deviation is 17%. The risk free rate is 3%.…

A: Sharp Ratio = ( Return of Portfolio - Risk free rate)/ Portfolio Standard deviation…

Q: You manage a risky portfolio with an expected rate of return of 22% and a standard deviation of 35%.…

A: A mixture of different kinds of funds and securities for the investment is term as the portfolio.

Q: You invest 80% of your portfolio in a risky portfolio that has an expected rate of return of 15% and…

A: Given: Weight of risky portfolio = 80% Expected return = 15% Standard deviation = 21% T bill rate =…

Q: Your portfolio has a beta of 1.24, a standard deviation of 14.3 percent, and an expected return of…

A: Portfolio beta = 1.24 Standard deviation = 14.3% Expected return = 12.50% Market return = 10.7% Risk…

Q: Your portfolio has 1 Standard Deviation of +/- 19% points from the average ATR of +12%. Given this…

A: Average True Range: Over a given time period, ATR is the average of the actual ranges that occurred.…

Q: Stocks C and F have the following historical returns: Year return (HPY) of C return (HPY) of F 2016…

A: The presentation of the ratio of the standard deviation of the project and the average return of a…

Q: A portfolio returned 13% last year, with a beta equal to 1.5. The market return was 10%, and the…

A: Portfolio return = 13% Beta = 1.50 Market return = 10% Risk free rate = 4%

Q: need help

A: A.Calculate the alpha of portfolios as follows:Portfolio A:

Q: The expected market return is E(RM)is estimated to be 12% per annum, while the risk-free return (rf)…

A: This question can be answered with the help of Capital Asset Pricing Model(CAPM). Ke=Rf+β(K m -Rf)…

Q: The Treasury bill rate is 4.9%, and the expected return on the market portfolio Is 11.1%. Use the…

A: According to the rule, we will answer the first three subparts, for the remaining subparts, kindly…

Q: Suppose you have portfolio of four stocks Stock A, B, C and D, Total investment in these stocks is…

A: According to CAPM required rate is equivalent to risk free rate plus market risk premium.

Q: The beta on risky asset A is 1.8 and the beta on risky asset B is 1.1. The expected return on the…

A: Beta on A = 1.8 Beta on B = 1.1 Expected Return on Market Portfolio = 10% Risk Free Rate = 4%…

Q: Consider the single factor APT. Portfolio A has a beta of 1.7 and an expected return of 21%.…

A: given, rise free rate = 11% Portfolio A beta = 1.7 Expected return =21% portfolio B beta=0.5…

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: Use the following information to answer the question(s) below. Market MSFT Risk-free Market MSFT…

A: The question is based on the concept of Capital asset pricing model theory (CAPM). CAPM explain the…

Q: Need help

A: The formula to calculate required return is given below:

Q: You are examining a portfolio manager’s active investing portfolio. The portfolio has a beta of 2…

A: The expected return is the minimum required rate of return which an investor required from the…

Q: You are going to invest $50,000 in a portfolio consisting of assets X, Y, and Z, as follows; What…

A: Expected return of the portfolio can be calculated by averaging the returns of assets in proportion…

Q: If the risk free rate is 4 9%, the expected return on the market portfolio is 1296 and the beta of…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: If you have the following data for an investment portfolio of Al-Ameen Financial Investment Company,…

A: Investment 1 = 12,500 Investment 2 = 110,000 Investment 3 = 150,000 Probability Investment 1…

Q: Consider stocks of Firms A and B. Their expected returns are 12% and 11%, respectively, and the…

A: In the given question we are provided with the information regarding stocks of two firms A and B.…

Q: Currently the risk-free rate equals 5% and the expected return on the market portfolio equals 11%.…

A: Given: Risk free rate “Rf” = 5% Market return “Rm” = 11% Stock A Beta = 1.33 Stock B Beta = 0.7…

Q: Your Company's manager has a $40 million portfolio with a beta of 1.00. The risk-free rate is 4.25%,…

Q: The UIB company desires to construct a portfolio with 15% expected return. The portfolio is to…

A: Hello, you have uploaded multiple questions here. I have resolved the first question ass per our…

Q: You are considering investing $10,000 in a risky portfolio. The value of the risky portfolio in a…

A: given information State probability Portfolio values Best 10%…

Q: You have the following rates of return for a risky portfolio for several recent years: 2013 35.23%…

A: Geometric average return is the average growth of the investment over a period. Given: Investment =…

Q: Suppose that you have $1 million and the following two opportunities from which to construct a…

A: The expected rate of return is the return an investor expects from its investment. It helps in…

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

Q: You have observed the following returns over time: Assume that the risk-free rate is 6% and the…

A: The required return is the amount of investment appreciation demanded by an investor for taking the…

Q: Suppose you have the following investments: Security Amount Invested Expected Return Beta A…

A: Security Amount Invested Expected Return Beta A $2,000 5% .80 B $4,000 10% .95 C $6,000 15%…

Q: A particular firm’s portfolio is composed of two assets, which we will call" A" and "B." Let X…

A: " Hi, Since you asked multiple sub-parts questions, we will answer the first three sub-parts for you…

Q: During a particular year, the T-bill rate was 6%, the market return was 14%, and a portfolio manager…

A: Securities market line (SML) is a graphical representation of capital asset pricing model (CAPM)…

Q: An investment firm uses the Carhart-Fama-French Model to track the performance of the portfolio…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: The risk-free rate is currently 8.1%. Use the data in the accompanying table for the Fio family’s…

A: Treynor's measure It measures the additional reward in terms of rate of return for per unit of risk.…

Q: What is the required return on an investment with a beta of 1.3 if the riskfree rate is 2.0 percent…

A: CAPM evolved as a way to measure this systematic risk. Sharpe found that the return on an individual…

Question

Use the data below to answer the following question. If you have a risk-aversion factor of 2.5 and the risk-free rate is 2%, you would invest _______% of your money in the risky portfolio.

Year	Return
2014	-15%
2015	-5%
2016	30%
2017	-10%
2018	35%

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Assume that you are given the following historical returns for the Market and Security J. Also assume that the expected risk-free rate for the coming year is 4.0 percent, while the expected market risk premium is 15.0 percent. Given this information, determine the required rate of return for Security J for the coming year, using CAPM. Year 1 2 O21.20% 3 4 5 6 O22.34% O 23.49% O24.63% O24.10% Market 10.00% 12.00% 16.00% 14.00% 12.00% 10.00% Security J 12.00% 14.00% 18.00% 22.00% 18.00% 14.00%
Year Risk free rate (%) Return_risk-free asset 2011 4.51 - 2012 3.11 2013 2.61 2014 2.75 2015 2.34 2016 1.78 2017 1.77 2018 2.02 2019 0.90 2020 0.02 Average Calculate return on risk free asset and its average and assume: Average (Return on Risky Portfolio) 3.86% Standard deviation (Risky Portfolio) 10.56% Expected Return (Complete Portfolio) 7% Solve for the proportions of y and (1-y) such that: E(Rc)=Rf+y[E(rp)-rf]) = 7%
You have the following rates of return for a risky portfolio for several recent years: 2013 35.23% 2014 18.62% 2015 —9.82% 2016 23.45% If you Invested $1000 alike beginning 2013, what would your investment be worth at the end of 2016 (using geometnc average return)
You are going to invest $20,000 in a portfolio consisting of assets X, Y, and Z, as follows: Asset Annual Return Probability Beta Proportion X 10% 0.50 1.2 0.333 Y 8% 0.25 1.6 0.333 Z 16% 0.25 2.0 0.333 Given the information in Table 5.2, The beta of the portfolio in Table 8.2, containing assets X, Y, and Z is ________. Select one: a. 1.6 b. 2.0 c. 1.5 d. 2.4
1. The expected returns for the two assets are given below: Year Asset F Asset G 2013 16% 17% 2014 17 16 2015 18 15 2016 19 14 A. Calculate the expected return for Asset F along with the standard deviation. B. If 50% of money is invested in Asset F and 50% in Asset G calculate the portfolio return and standard deviation
Suppose we want to determine the expected return and standard deviation for a portfolio of assets A (60%) and B (40%). The expected returns of assets A and B for each of the next 5 years are given in columns 1 and 2 respectively in the table. Find the expected return and standard deviation for the portfolio.Years A B2018 10% 6%2019 15% 8%2020 12% 10%2021 9% 7%2022 14% 9%
The risk-free rate is currently 3.3%, and the market return is 14.8%. Assume you are considering the following investments: Investment Beta A 1.54 B 1.16 C 0.51 D 0.11 E 2.14 . a. Which investment is most risky? Least risky? b. Use the capital asset pricing model (CAPM) to find the required return on each of the investments. c. Find the security market line (SML), using your findings in part b. d. On the basis of your findings in part c, what relationship exists between risk and return? Explain.
Assume that ASX 300 Index represents the risky portfolio. Calculate the annual return for the period 2011- 2020 for the risky portfolio using the data given for the ASX 300 Index. Year ASX 300 Index ASX 300 Dividend Yield (%) Return_risky portfolio 2010 4760.79 3.76 - 2011 4052.27 4.93 ??? 2012 4626.27 4.33 ??? 2013 5304.8 3.99 ??? 2014 5348.93 4.24 ??? 2015 5249.09 4.72 ??? 2016 5617.73 4.09 ??? 2017 6023.3 4.04 ??? 2018 5596.96 4.48 ??? 2019 6647.74 3.95 ??? 2020 6574.33 2.82 ??? Calculate the annual return for the period 2011-2020 for the risk-free asset using the data given for the risk-free asset Year Risk free rate (%) Return_risk-free asset 2011 5.03 2012 4.51 ??? 2013 3.11 ??? 2014 2.61 ??? 2015 2.75 ??? 2016 2.34 ??? 2017 1.78 ??? 2018 1.77 ??? 2019 2.02 ??? 2020…
Imagine you wish to estimate the betas for two investments, A and B. You have gathered the following return data for the market and for each of the investments over the past 10 years, 2010-2019 2019 Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 12% Market returns 2% 13% -7% 1% 9% 10% 21% -10% 4% 10% Stock A returns 5% 10% -2% 0% 5% 12% 15% -9% 1% 15% Stock B returns 7% 9% 3% -2% 11% 9% 10% -11% 2% a. On a set of market return (x-axis)-investment return (y-axis) axes, use the data to draw the characteristic lines for investments A and B on the same graph. b. Use the characteristic lines from part a to estimate the betas for investments A and B. c. Use the betas found in part b to comment on the relative risks of investments A and B
The investor has R60,000 to invest. R15,000 will be invested into the market portfolio, R10,000 into asset A and R25,000 into asset B. The balance will be invested into the risk-free asset. The beta for asset A and asset B is 0.90 and 1.2 respectively. What is the portfolio beta? What is the correct answer? A. 0.09 B. 0.90 C. 0.91 D. 0.92
You want to create a portfolio equally as risky as the market, and you have $5M to invest. Given the information below, what is your investment in the risk-free asset? Asset Stock A Stock B Stock C Risk-free Asset $0.8M $0.7M $0.9M $1.1M Investment $1M $2M Beta 0.7 1.25 1.5
Assume that the risk-free rate, RF, is currently 8%, the market return, RM, is 12%, and asset A has a beta, of 1.10. (could be done on word document or excel). Draw the security market line (SML) Use the CAPM to calculate the required return, on asset A. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 2%, to be14%. Ignoring the shift in part c, draw the new SML on the same set of axes that you used before, and calculate and show the new required return for asset A.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS