The Expected Return, Standard Deviation of Portfolio. Introduction : Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

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Answer 1

Question

Chapter 11, Problem 28QP

a.

Summary Introduction

To determine: The Expected Return, Standard Deviation of Portfolio.

Introduction: Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

b.

Summary Introduction

To determine: The Standard Deviation of Portfolio.

c.

Summary Introduction

To determine: Reasons correlation between the returns on Stock A and Stock B affect the portfolio’s standard deviation.

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Portfolios A and B are both well-diversified. The risk-free rate is 8%. The return for the market is 10%. Portfolio A has an expected return of 15% and beta of 1.1. Portfolio B has an expected return of 9% and beta of 0.20. Portfolio A's variance is 9%, whilst Portfolio B's variance is 5.5%. Calculate for Portfolio A and Portfolio B the following: 1. Sharpe's Measure, 2. Treynor's Measure, 3. Jensen's Measure. Which is the better portfolio according to each measure?

The following portfolios are being considered for investment. During the period under consideration, RFR = 0.07.Portfolio Return Beta σiA 0.15 1.0 0.05B 0.20 1.5 0.10C 0.10 0.6 0.03D 0.17 1.1 0.06Market 0.13 1.0 0.04 a. Compute the Sharpe measure for each portfolio and the market portfolio. b. Compute the Treynor measure for each portfolio and the market portfolio. c. Rank the portfolios using each measure, explaining the cause for any differences you find in the rankings.

Assume that the covariance between Stock A and Stock B is -28%^2 (0.0028). Compute the expected rate of return and variance of rate of return of Donald’s portfolio.

Answer 2

Question

Chapter 11, Problem 28QP

a.

Summary Introduction

To determine: The Expected Return, Standard Deviation of Portfolio.

Introduction: Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

b.

Summary Introduction

To determine: The Standard Deviation of Portfolio.

c.

Summary Introduction

To determine: Reasons correlation between the returns on Stock A and Stock B affect the portfolio’s standard deviation.

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Answer 3

Question

Chapter 11, Problem 28QP

a.

Summary Introduction

To determine: The Expected Return, Standard Deviation of Portfolio.

Introduction: Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

b.

Summary Introduction

To determine: The Standard Deviation of Portfolio.

c.

Summary Introduction

To determine: Reasons correlation between the returns on Stock A and Stock B affect the portfolio’s standard deviation.

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Answer 4

Question

Chapter 11, Problem 28QP

a.

Summary Introduction

To determine: The Expected Return, Standard Deviation of Portfolio.

Introduction: Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

b.

Summary Introduction

To determine: The Standard Deviation of Portfolio.

c.

Summary Introduction

To determine: Reasons correlation between the returns on Stock A and Stock B affect the portfolio’s standard deviation.

Expert Solution & Answer

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Answer 5

Chapter 11, Problem 28QP

a.

Summary Introduction

To determine: The Expected Return, Standard Deviation of Portfolio.

Introduction: Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

b.

Summary Introduction

To determine: The Standard Deviation of Portfolio.

c.

Summary Introduction

To determine: Reasons correlation between the returns on Stock A and Stock B affect the portfolio’s standard deviation.

Answer 6

Chapter 11, Problem 28QP

a.

Summary Introduction

To determine: The Expected Return, Standard Deviation of Portfolio.

Introduction: Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

Answer 7

Chapter 11, Problem 28QP

a.

Summary Introduction

To determine: The Expected Return, Standard Deviation of Portfolio.

Introduction: Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

Answer 8

b.

Summary Introduction

To determine: The Standard Deviation of Portfolio.

Answer 9

b.

Summary Introduction

To determine: The Standard Deviation of Portfolio.

Answer 10

c.

Summary Introduction

To determine: Reasons correlation between the returns on Stock A and Stock B affect the portfolio’s standard deviation.

Answer 11

c.

Summary Introduction

To determine: Reasons correlation between the returns on Stock A and Stock B affect the portfolio’s standard deviation.

Answer 12

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Answer 13

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Answer 14

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Answer 15

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The Expected Return, Standard Deviation of Portfolio. Introduction : Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

Solution Summary: The author explains the Expected Return and Standard Deviation of Portfolio. The expected return is 12.30% and the standard deviation is 57.45%.

Videos

To determine: The Expected Return, Standard Deviation of Portfolio.

Introduction: Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

To determine: The Standard Deviation of Portfolio.

To determine: Reasons correlation between the returns on Stock A and Stock B affect the portfolio’s standard deviation.

Want to see the full answer?

Chapter 11 Solutions

The Expected Return, Standard Deviation of Portfolio. Introduction : Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

Solution Summary: The author explains the Expected Return and Standard Deviation of Portfolio. The expected return is 12.30% and the standard deviation is 57.45%.

Videos

To determine: The Expected Return, Standard Deviation of Portfolio. Introduction: Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.

To determine: The Standard Deviation of Portfolio.

To determine: Reasons correlation between the returns on Stock A and Stock B affect the portfolio’s standard deviation.

Want to see the full answer?

Chapter 11 Solutions

To determine: The Expected Return, Standard Deviation of Portfolio.

Introduction: Expected Return is a process of estimating the profits and losses an investor earns through the expected rate of returns. Standard deviation is apportioned of distribution of a collection of figures from its mean.