CORPORATE FINANCE (LL+CONNECT)
12th Edition
ISBN: 9781266427404
Author: Ross
Publisher: MCG CUSTOM
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Question
Chapter 11, Problem 30QAP
a.
Summary Introduction
Adequate information:
Market expected return [E(RM)] = 11.5% or 0.115
Market standard deviation (σM) = 19% or 0.19
Risk-free rate (Rf) = 1.4% or 0.041
Standard deviation of portfolio (σp) = 9% or 0.09
To compute: Expected return on the portfolio.
Introduction: Expected return on the portfolio refers to the return that is anticipated on the portfolio as a whole.
b.
Summary Introduction
Adequate information:
Market expected return [E(RM)] = 11.5% or 0.115
Market standard deviation (σM) = 19% or 0.19
Risk-free rate (Rf) = 1.4% or 0.041
Expected return of portfolio [E(RP)] = 20% or 0.20
To compute: Standard deviation on the portfolio
Introduction: The standard deviation on the portfolio measures the risk or inherent volatility of an investment.
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Check out a sample textbook solutionStudents have asked these similar questions
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset:
Portfolio
Y
Z
Market
Risk-free
Rp
13.5%
бр
35.00%
12.5
30.00
7.1
20.00
10.6
4.4
25.00
0
Вр
1.55
1.20
0.80
1.00
0
Assume that the correlation of returns on Portfolio Y to returns on the market is 0.70. What percentage of Portfolio Y's return is driven
by the market?
Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places.
× Answer is complete but not entirely correct.
R-squared
0.9785
b. A portfolio that combines the risk-free asset and the market portfolio has an expected return of
7 percent and a standard deviation of 10 percent. The risk-free rate is 4 percent, and the
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expected return on the market portfolio is 12 percent. Assume the capital asset pricing model
holds. What expected rate of return would a security earn if it had a .45 correlation with the
market portfolio and a standard deviation of 55 percent?
Suppose the risk-free rate is 6 percent and the market portfolio has an expected return of 12 percent. The market portfolio has a standard deviation of 7 percent. Portfolio Z has a correlation coefficient with the market of 0.35 and standard deviation of 6 percent. According to the capital asset pricing model, what is the expected return on portfolio Z
a.
12.6 percent
b.
7.8 percent
c.
9.87 percent
d.
12.05 percent
Chapter 11 Solutions
CORPORATE FINANCE (LL+CONNECT)
Ch. 11 - Diversifiable and Nondiversifiable Risks In broad...Ch. 11 - Systematic versus Unsystematic Risk Classify the...Ch. 11 - Expected Portfolio Returns If a portfolio has a...Ch. 11 - Diversification True or false: The most important...Ch. 11 - Portfolio Risk If a portfolio has a positive...Ch. 11 - Beta and CAPM Is it possible that a risky asset...Ch. 11 - Covariance Briefly explain why the covariance of a...Ch. 11 - Prob. 8CQCh. 11 - Prob. 9CQCh. 11 - Prob. 10CQ
Ch. 11 - Determining Portfolio Weights What are the...Ch. 11 - Portfolio Expected Return You own a portfolio that...Ch. 11 - Prob. 3QAPCh. 11 - Portfolio Expected Return You have 10,000 to...Ch. 11 - Prob. 5QAPCh. 11 - Prob. 6QAPCh. 11 - Calculating Expected Returns A portfolio is...Ch. 11 - Returns and Standard Deviations Consider the...Ch. 11 - Returns and Standard Deviations Consider the...Ch. 11 - Calculating Portfolio Betas You own a stock...Ch. 11 - Calculating Portfolio Betas You own a portfolio...Ch. 11 - Using CAPM A stock has a beta of 1.15, the...Ch. 11 - Prob. 13QAPCh. 11 - Prob. 14QAPCh. 11 - Prob. 15QAPCh. 11 - Using CAPM A stock has a beta of 1.08 and an...Ch. 11 - Prob. 17QAPCh. 11 - Reward-to-Risk Ratios Stock Y has a beta of 1.15...Ch. 11 - Prob. 19QAPCh. 11 - Portfolio Returns Using information from the...Ch. 11 - Prob. 21QAPCh. 11 - Prob. 22QAPCh. 11 - Analyzing a Portfolio You want to create a...Ch. 11 - Prob. 24QAPCh. 11 - Prob. 25QAPCh. 11 - Prob. 26QAPCh. 11 - Prob. 27QAPCh. 11 - Prob. 28QAPCh. 11 - Prob. 29QAPCh. 11 - Prob. 30QAPCh. 11 - Prob. 31QAPCh. 11 - Prob. 32QAPCh. 11 - Prob. 33QAPCh. 11 - Prob. 34QAPCh. 11 - Prob. 35QAPCh. 11 - Prob. 36QAPCh. 11 - Prob. 37QAPCh. 11 - Prob. 38QAPCh. 11 - Prob. 1MCCh. 11 - Prob. 2MC
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