You manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 36%. The T-bill rate is 5%.Your client chooses to invest 60% of a portfolio in your fund and 40% in an essentially risk-free money market fund. What are theexpected return and standard deviation of the rate of return on his portfolio? (Do not round intermediate calculations. Round"Standard deviation" to 2 decimal places.)Rate of ReturnExpected return%Standard deviation%

The Expected rate of return or the overall rate of return of the portfolio shows the total return…

Answered: You manage a risky portfolio with an…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13P

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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?
Suppose that the return for a particular large-cap stock fund is normally distributed with a mean of 14.4% and standard deviation of 4.4%. a. What is the probability that the large-cap stock fund has a return of at least 20%? b. What is the probability that the large-cap stock fund has a return of 10% or less?
You manage a risky portfolio with an expected rate of return of 19% and a standard deviation of 31%. The T-bill rate is 5%. Your client chooses to invest 60% of a portfolio in your fund and 40% in an essentially risk-free money market fund. What is the expected return and standard deviation of the rate of return on his portfolio? (Do not round intermediate calculations. Round "Standard deviation" to 1 decimal place.)
You manage a risky portfolio with an expected rate of return of 19% and a standard deviation of 30%. The T-bill rate is 4%. Your client chooses to invest 75% of a portfolio in your fund and 25% in a T-bill money market fund. What is the reward-to-volatility (Sharpe) ratio (S) of your risky portfolio? Your client’s? (Do not round intermediate calculations. Round your answers to 4 decimal places.)
You manage a risky portfolio with an expected rate of return of 11% and a standard deviation of 33%. The T-bill rate is 3%. Your client chooses to invest 80% of a portfolio in your fund and 20% in an essentially risk-free money market fund. What are the expected return and standard deviation of the rate of return on his portfolio?
You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 37%. The T-bill rate is 5%. Your client chooses to invest 80% of a portfolio in your fund and 20% in a T-bill money market fund. Suppose that your risky portfolio includes the following investments in the given proportions: Srock A 29% Stock B 35% Stock C 36% What are the investment proportions of your client’s overall portfolio, including the position in T-bills? (Round your answers to 1 decimal place.) Investment Propositions T-bills Stock A Stock B Stock C
You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 28%. The T-bill rate is 8%. Your client chooses to invest 70% of a portfolio in your fund and 30% in an essentially risk-free money market fund. What is the expected value and standard deviation of the rate of return on his portfolio?
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…
If your portfolio includes 35 percent of X, 40 percent of Y and 25 percent of Z, answer the following questions: (a) Calculate the portfolio expected return. (b) Calculate the variance and the standard deviation of the portfolio. (c) If the expected T-bill rate is 3.80 percent, calculate the expected risk premium on the portfolio. (d) If the market index fund has the same expected return as your portfolio, without considering any transaction cost, would you consider selling your portfolio and investing the market index fund instead? Explain your thoughts.
You manage a risky portfolio with an expected rate of return of 19% and a standard deviation of 31%. The T-bill rate is 5%. Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolio’s standard deviation will not exceed 19%. a. What is the investment proportion, y? (Round your answer to 2 decimal places.) b. What is the expected rate of return on the complete portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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 17% and a standard deviation of 27%. The T-bill rate is 7%. 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 return and standard deviation of your client’s portfolio? Suppose your risky portfolio includes the following investments in the given proportions: Stock A 27% Stock B 33 Stock C 40 What are the investment proportions of each stock in your client’s overall portfolio, including the position in T-bills? What is the Sharpe ratio (S) of your risky portfolio and your client’s overall portfolio? 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.

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