Question

You have the following assets available to you to invest in: Asset Expected Return Standard Deviation...

You have the following assets available to you to invest in:

Asset

Expected Return

Standard Deviation

Risky debt

6%

0.25

Equity

10%

.60

Riskless debt

4.5%

0

The coefficient of correlation between the returns on the risky debt and equity is 0.72

2D. Hector has a coefficient of risk aversion of 1.8. What percentage of his assets should he invest in the risky portfolio?

2E. What would the expected return be on Hector’s portfolio?

2F. What would the standard deviation of Hector’s portfolio be?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Asset Expected Return Standard Deviation Risky debt 6% 0.25 Equity 10% .60 Riskless debt 4.5% 0...
Asset Expected Return Standard Deviation Risky debt 6% 0.25 Equity 10% .60 Riskless debt 4.5% 0 The coefficient of correlation between the returns on the risky debt and equity is 0.72 2A. Using the Markowitz portfolio optimization method, what would the composition of the optimal risky portfolio of these assets be? Please show work
Asset Expected Return Standard Deviation Risky debt 6% 0.25 Equity 10% .60 Riskless debt 4.5% 0...
Asset Expected Return Standard Deviation Risky debt 6% 0.25 Equity 10% .60 Riskless debt 4.5% 0 The coefficient of correlation between the returns on the risky debt and equity is 0.72 2A. Using the Markowitz portfolio optimization method, what would the composition of the optimal risky portfolio of these assets be? 10 points 2B. What would the expected return be on this optimal portfolio? 2 points 2C. What would the standard deviation of this optimal portfolio be? 3 points
Risky Asset A and Risky Asset B are combined so that the new portfolio consists of...
Risky Asset A and Risky Asset B are combined so that the new portfolio consists of 70% Risky Asset A and 30% Risky Asset B.  If the expected return and standard deviation of Asset A are 0.08 and 0.16, respectively, and the expected return and standard deviation of Asset B are 0.10 and 0.20, respectively, and the correlation coefficient between the two is 0.25: (13 pts.) What is the expected return of the new portfolio consisting of Assets A & B...
Fred can invest in a risky portfolio with a 25% standard deviation an expected return of...
Fred can invest in a risky portfolio with a 25% standard deviation an expected return of 15% and T-bills which currently pay 4.5%. How much should Fred invest in the risky portfolio if he wants to earn a 12% return  ? What is the standard deviation (%) of Fred’s portfolio  ? What is Sharpe ratio of Fred’s portfolio
1. There are 2 assets you can invest in: a risky portfolio with an expected return...
1. There are 2 assets you can invest in: a risky portfolio with an expected return of 6% and volatility of 15%, and a government t-bill (always used as the 'risk-free' asset) with a guaranteed return of 1%. Your risk-aversion coefficient A = 4, and the utility you get from your investment portfolio can be described in the standard way as U = E(r) - 1/2 * A * variance. Assume that you can borrow money at the risk-free rate....
the expected return and standard deviation of S is 14% and 29%, respectively. the expected return...
the expected return and standard deviation of S is 14% and 29%, respectively. the expected return and standard deviation of B is 6% and 15%, respectively. correlation between S and B is -0.1 T-bill rate is 1% and The client’s risk aversion (A) is 8 1- What is the expected return and standard deviation of the optimal risky portfolio?  2-Find the proportion of the optimal risky portfolio (= y) in your client’s complete portfolio. 3-What is the expected return and standard...
You are constructing a portfolio from two assets. The first asset has an expected return of...
You are constructing a portfolio from two assets. The first asset has an expected return of 7.7% and a standard deviation of 7.8%. The second asset has an expected return of 10.2% and a standard deviation of 12.6%. You plan to invest 41% of your money in the first asset, and the rest in asset 2. If the assets have a correlation coefficient of -0.61, what will the standard deviation of your portfolio be?
You invest $1000 in a risky asset with an expected rate of return of 0.14 and...
You invest $1000 in a risky asset with an expected rate of return of 0.14 and a standard deviation of 0.20 and a T-bill with a rate of return of 0.06. The risky asset has a beta of 1.4. If you have a risk-aversion parameter of 2.5, what is the beta of your complete portfolio? A. 0.28 B. 0.80 C. 1.00 D. 1.12 E. 1.32
There are 2 assets. Asset 1: Expected return 7.5%, standard deviation 9% Asset 2: Expected return...
There are 2 assets. Asset 1: Expected return 7.5%, standard deviation 9% Asset 2: Expected return 11%, standard deviation 12%. You are not sure about the correlation between 2 assets. You hold 30% of your portfolio in asset 1 and 70% in asset 2. What is the highest possible variance of your portfolio? Hint 1: Think how the portfolio variance depends on the correlation between 2 assets. Hint 2: Think which values the correlation between Asset 1 and Asset 2...
You invest $100 partly in a risky asset with an expected rate of return of 11%...
You invest $100 partly in a risky asset with an expected rate of return of 11% and a standard deviation of 21% and partly in T-bills with a yield of 4.5%. What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 8.0%?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT