Adequate information: Expected rate of return of risky asset =18% Standard deviation of the risky asset=28% T-bill rate is 8% Client wants to invest in your portfolio in the proportion Y Overall portfolio’s expected rate of return =16% To compute: The proportion of Y Introduction: Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Question

Want to see the full answer?

Answer 1

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

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?

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?

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.)

Answer 2

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 6

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 7

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 8

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 9

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 10

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 11

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 15

Ch. 6.A - Prob. 1P Ch. 6.A - Prob. 2P Ch. 6 - Prob. 1PS Ch. 6 - Prob. 2PS Ch. 6 - Prob. 3PS Ch. 6 - Prob. 4PS Ch. 6 - Prob. 5PS Ch. 6 - Prob. 6PS Ch. 6 - Prob. 7PS Ch. 6 - Prob. 8PS

Solution Summary: The author explains how to calculate the proportion of Y by dividing each item of the stock position’s cash value by the complete or total portfolio value.

Videos

Want to see the full answer?

Chapter 6 Solutions