Question

You are trying to build the best possible risky portfolio for your investment clients. You have...

You are trying to build the best possible risky portfolio for your investment clients. You have two risky assets available to you: A risky stock with an expected excess return of 0.246 and a standard deviation of 0.20, and a risky bond with an expected excess return of 0.071, and a standard deviation of 0.702. If these two assets have a coefficient of correlation of 0.08, what proportion of the money you invest in risky assets should you put in the bond? An answer of 0 means invest no money in the bond, an answer of 1 means put all of your money in the bond.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The proportion of money to be invested in the bond is 0.0563.

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
You are trying to build the best possible risky portfolio for your investment clients. You have...
You are trying to build the best possible risky portfolio for your investment clients. You have two risky assets available to you: A risky stock with an expected excess return of 0.199 and a standard deviation of 0.01, and a risky bond with an expected excess return of 0.039, and a standard deviation of 0.916. If these two assets have a coefficient of correlation of 0.22, what proportion of the money you invest in risky assets should you put in...
You are trying to build the best possible risky portfolio for your investment clients. You have...
You are trying to build the best possible risky portfolio for your investment clients. You have two risky assets available to you: A risky stock with an expected excess return of 0.281 and a standard deviation of 0.83, and a risky bond with an expected excess return of 0.078, and a standard deviation of 0.816. If these two assets have a coefficient of correlation of 0.23, what proportion of the money you invest in risky assets should you put in...
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...
You are a financial advisor who offers investment advice to your clients. There are two risky...
You are a financial advisor who offers investment advice to your clients. There are two risky assets in the market: portfolio X and portfolio Y. X has an expected return of 15% and standard deviation of 35%. The expected return and standard deviation for Y is 20% and 45% respectively. The correlation between the two portfolios is 0.2. The rate of risk-free asset, T-bill, is 5%. a) Peter is one of your clients and he can only invest in T-bill...
You put half of your money in a stock portfolio that has an expected return of...
You put half of your money in a stock portfolio that has an expected return of 14% and a standard deviation of 36%. You put the rest of your money in a risky bond portfolio that has an expected return of 6% and a standard deviation of 12%. The stock and bond portfolio have a correlation 0.35. The standard deviation of the resulting portfolio will be ________________. Use Portfolio variance formula A. more than 18% but less than 24% B....
Drew can design a risky portfolio based on two risky assets, Origami and Gamiori. Origami has...
Drew can design a risky portfolio based on two risky assets, Origami and Gamiori. Origami has an expected return of 13% and a standard deviation of 20%. Gamiori has an expected return of 6% and a standard deviation of 10%. The correlation coefficient between the returns of Origami and Gamiori is - 0.20 (negative 0.20). The risk-free rate of return is 2%. Among all possible portfolios constructed from Origami and Gamiori, what is the minimum variance?
Drew can design a risky portfolio based on two risky assets, Origami and Gamiori. Origami has...
Drew can design a risky portfolio based on two risky assets, Origami and Gamiori. Origami has an expected return of 13% and a standard deviation of 20%. Gamiori has an expected return of 6% and a standard deviation of 10%. The correlation coefficient between the returns of Origami and Gamiori is 0.30. The risk-free rate of return is 4%. If Drew invests 30% money in Gamiori and the remaining in Origami, what is the standard deviation of his portfolio?
1) You are a fund manager considering two risky assets that have a covariance of 20,...
1) You are a fund manager considering two risky assets that have a covariance of 20, a stock fund with an expected return of 17% and a standard deviation of 21%, a bond fund with an expected return of 7% and a standard deviation of 5%, and a T-Bill fund with a return of 6%. a) What are the investment proportions of the two risky assets in the optimal portfolio? b) What is the expected value of its rate of...
You invest $10,000 in a complete portfolio. The complete portfolio is composed of a risky asset...
You invest $10,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 20% and a standard deviation of 21% and a treasury bill with a rate of return of 5%. How much money should be invested in the risky asset to form a portfolio with an expected return of 8%?
You are attempting to build a portfolio using the index model, and are currently trying to...
You are attempting to build a portfolio using the index model, and are currently trying to decide how much of your risky portfolio you want in the actively managed portfolio, and how much you want in the index fund. Your actively managed portfolio has an alpha of 0.022 and an indiosyncratic variance of 0.21. The index fund has an expected excess return of 0.079 and a variance of 0.40. Assuming the beta of your actively managed portfolio is 1, what...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT