You want to create a portfolio equally as risky as the market, and you have $2,400,000 to invest. Given this information, fill in the rest of the following table: (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Asset Investment Beta Stock A $360,000 1.00 Stock B $624,000 1.10 Stock C 1.20 Risk-free asset
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Problem 11-23 Analyzing a Portfolio
You want to create a portfolio equally as risky as the market, and you have $2,400,000 to invest. Given this information, fill in the rest of the following table: (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) |
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- Question 9 - Chap12 HW - Connect You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are as follows: Years Cash Flow 0 – 100 1-10 + 14 On the basis of the behavior of the firm’s stock, you believe that the beta of the firm is 1.48. Assuming that the rate of return available on risk-free investments is 6% and that the expected rate of return on the market portfolio is 16%, what is the net present value of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 2 decimal places.)INV 1 4b You have invested in a portfolio of 60% in risky assets (Portfolio R) and 40% in T-bills. The risky portfolio is described below: E(rR)=12% σR =15% Compute the standard deviation of your overall portfolio.Question 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
- INV 1 4b You have invested in a portfolio of 60% in risky assets (Portfolio R) and 40% in T-bills. The risky portfolio is described below: E(rR)=12% σR =15% T-bill rate 3% Expected Return on Overall Portfolio is 8.4% What is the standard deviation of your overall portfolio?D4) Finance Consider a portfolio composed of shares AAA and BBB as shown in the following table. At 95% confidence level, select the correct statement AAA BBB Value 2,470,000 785,750 % investment 76% 24% Volatilities 2.32 % 2.69 % Correlation for both assets 0.65 Portfolio Value for both assets 3,255,750 a) The Component VaR of the Asset AAA is 92,223 and the component VaR of the Asset BBB is 27955.69 b) The contribution to the VaR of the Asset AAA is 77% and the one of the Asset 2 is 23% c) Both answers are correctQuestion content area top Part 1 (Capital asset pricing model) Anita, Inc. is considering the following investments. The current rate on Treasury bills is 7 percent, and the expected return for the market is 12.5 percent. Using the CAPM, what rates of return should Anita require for each individual security? Stock Beta H 0.71 T 1.62 P 0.89 W 1.37 (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The expected rate of return for security H, which has a beta of 0.71, is enter your response here%. (Round to two decimal places.) Part 2 b. The expected rate of return for security T, which has a beta of 1.62, is enter your response here%. (Round to two decimal places.) Part 3 c. The expected rate of return for security P, which has a beta of 0.89, is enter your response here%. (Round to two decimal places.) Part 4 d. The expected rate of return for…
- Problem 13-10 Returns and Standard Deviations [LO1] Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C Boom .15 .37 .47 .27 Good .45 .22 .18 .11 Poor .35 −.04 −.07 −.05 Bust .05 −.18 −.22 −.08 a. Your portfolio is invested 20 percent each in A and C, and 60 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) b-2. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Q No 3 Assume you are a portfolio manager at JS Global Capital Ltd. Recently you came across three attractive stocks and want to create a portfolio investment in these three stocks. The details of the stocks are given below: Company name Volatility (Standard deviation) Weight in Portfolio Correlation with the market portfolio Engro Ltd 25% 0.30 0.40 Lucky Cement Ltd 12% 0.30 0.60 FFC Ltd 13% 0.40 0.50 The expected return on the market portfolio is 8% and its volatility is 10%. The risk-free rate based on central bank’s discount rate is 3%. Calculate each of the stock’s expected return and risk (beta) as compared to the market What should be the expected return of the portfolio based on values calculated in part a. Calculate the beta of the portfolio? what does it tells regarding the riskiness of the portfolio?QUESTION 3 – Risk and ReturnSintok Corporation has collected information on the following three investments. Which investment is the most favourable based on the information presented?Stock A Stock B Stock CProbability Return Probability Return Probability Return0.15 2% 0.25 -3% 0.1 -5%0.4 7% 0.5 20% 0.4 10%0.3 10% 0.25 25% 0.3 15%0.15 15% 0.2 30%
- Hide student question Issue #11: Comparison of Returns on $200000 and 5.5% on$70,000 Investors, as reasonable economic creatures commit toinvestment portfolios with the expectation of earning valuable returns. Keon as a logical investor believes his investment should provide the best value of rewards and is considering which option to invest in. The expected returns should be something similar or equal to his historical gain of 9% per annum. If Keon should leave $70,000 in the safe investment , his only expected return will be $3,850 (70,000*5.5%) in nominal terms per annum. However, if he invests the $200,000 by going entrepreneurial, Keon can potentially make a significant gain as per below. Return on Investment (ROI) ROI = Net Income * 100 Cost of Investment Cost of investment = $200, 000 Cost of 1 Limousine = 80,000 Total Cost of Limousines = (80,000*4) = 320,000 Useful Life of 1 Limousine = 20 yrs Depreciation per year = 80,000 = 4,000 20…QUESTION 10 An investor wishes to construct a portfolio by borrowing 35 percent of his original wealth and investing all the money in a stock index. The return on the risk-free asset is 4.0 percent, and the expected return on the stock index is 15 percent. Calculate the expected return on the portfolio. a. 9.50 percent b. 18.25 percent c. 11.15 percent d. 15.00 percent e. 18.85 percent13 You invested 10 000 USD and your dividends are 2.1 % and capital appreciation is 7.4%. Calculate the value of your portfolio assuming that a) Ending investment value, no reinvestment, and assuming dividends are paid at year end b. Ending investment value, with reinvestment, and assuming dividends are paid at year end. (Again, this is simpler to solve using Excel or other spreadsheet. Furthermore, the numbers as shown may not add to the actual amounts shown due to rounding error.)