You are examining a portfolio manager’s active investing portfolio. The portfolio has a beta of 2 and has an average return of 15%. The risk free rate is 1% and the market return is 10%, is the manager’s active investing strategy working ?
Q: You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the…
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A: Risk free rate (Rf) = 5% Portfolio beta = 1.2 Market risk premium (Rm - Rf) = 6%
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A: Note: Since you have multiple questions in one question, we will solve only the first three for you.…
Q: M4
A: Information ratio = Return of portfolio-Return of benchmarkTracking errorTracking error = Risk of…
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Q: EXPECTER RETURN OF A PORTFOLIO please see attatch file
A: Expected return on portfolio is sum of weighted return on individual stocks
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A: A portfolio is a combination or group of financial instruments and securities that are held by an…
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: 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…
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A: a.Calculate the expected rate of return for Manager Y as follows:
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A: Risky portfolio: Expected return of risky portfolio=WeightX×ReturnX+WeightY×ReturnYExpected return…
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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: You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 36%.…
A: Risky portfolio rate of return (Re) = 18% Risky portfolio standard deviation (Se) = 36% T bill rate…
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A: Required rate of return = risk free rate + beta * (market return - risk free rate)
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A: Ans: (i) Currently the client has invested in active portfolio. So his expected return is 13% and…
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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…
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A: Formula used is as follows: Required rate of return = Rf + Beta * (Rm - Rf)
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You are examining a
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- You have observed the following returns over time: Assume that the risk-free rate is 6% and the market risk premium is 5%. What are the betas of Stocks X and Y? What are the required rates of return on Stocks X and Y? What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y?An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?Your client is shocked at how much risk Blandy stock has and would like to reduce the level of risk. You suggest that the client sell 25% of the Blandy stock and create a portfolio with 75% Blandy stock and 25% in the high-risk Gourmange stock. How do you suppose the client will react to replacing some of the Blandy stock with high-risk stock? Show the client what the proposed portfolio return would have been in each year of the sample. Then calculate the average return and standard deviation using the portfolios annual returns. How does the risk of this two-stock portfolio compare with the risk of the individual stocks if they were held in isolation?
- You manage a risky portfolio containing 25% of Stock A, 32% of Stock B and 43% of Stock C, respectively, with expected rate of return of 18% and standard deviation of 28%. The Tbill rate is 8%. Draw the Capital Allocation Line (CAL) of your portfolio on an expected returnstandard deviation diagram. What is the slope of the CAL? Suppose that the client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 16%. Show the position of your client on your fund’s CAL. What is the proportion y? What are your client’s investment proportions in your three stocks and the T-bill fund?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?What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T? The risk-free rate is 6% and the market portfolio's return is 14%. Do you expect the investment to be a good one for the coming year if betas for the two portfolio components are 0.6 and 1.3, respectively?
- You manage a risky portfolio with an expected rate of return of 22% and a standard deviation of 35%. The T-bill rate is 6%. Your risky portfolio includes the following investments in the given proportions: Stock A 33% Stock B 36% Stock C 31% Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 18%. a. What is the proportion y? (Round your answer to the nearest whole number.) b. What are your client’s investment proportions in your three stocks and the T-bill fund? (Do not round intermediate calculations. Round your answers to 2 decimal place.) c. What is the standard deviation of the rate of return on your client’s portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal place.)You manage a risky portfolio with expected rate of return of 18% and standard deviation of 28%. The T-bill rate is 8%. a. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. What is the expected value and standard deviation of the rate of return on his portfolio? b. What is the reward-to-volatility ratio (S) of your risky portfolio? Your client’s? c. Draw the CAL of your portfolio on an expected return–standard deviation diagram. What is the slope of the CAL? Show the position of your client on your fund’s CAL. d. Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 16%. What is the proportion y? What is the standard deviation of the rate of return on your client’s portfolio? e. Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject…You manage a risky portfolio with an expected rate of return of 12% and a standard deviation of 36%. The T-bill rate is 3%. Stock A 27% Stock B 35% Stock C 38% Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 10%. Required: What is the proportion y? What are your client’s investment proportions in your three stocks and the T-bill fund? What is the standard deviation of the rate of return on your client’s portfolio?
- Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 40%. The T-bill rate is 5% A client prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio subject to the constraint that the overall portfolio's standard deviation will not exceed 30%. What is the investment proportion, y? What is the expected rate of return on the overall portfolioWhat is the Sharpe ratio (S) of your risky portfolio and your client’s overall portfolio? , assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%.Your client decides to invest $60 million in Flama and $40 million in Blanca stocks. The risk-free rate is 2% and the market risk premium is 4%. The beta of the Flama Stock is 2, and the beta of the Blanca stock is 4. What are the weights for this portfolio? What is the portfolio beta? What is the required return of the portfolio?