Question

26 .S and T are two portfolios on the efficient frontier, the following table summarizes the...

26 .S and T are two portfolios on the efficient frontier, the following table summarizes the weights of five stock in each portfolio: Stock Stock Weights for Portfolio S Stock Weights for Portfolio T Expected Return INTC 20% 20% 15% MRK 20% 30% 25% MSFT 30% 20% 10% APPL 15% 0% 8% JPM 15% 30% 14% a) Find the expected return of each portfolio. b) Ouday invests $500,000 in portfolio S and $800,000 in portfolio T. 1) What amount of his portfolio will be invested in each stock? 2) Find the expected return of Ouday’s portfolio.

please , i need the answer quickly , thank you ...

Homework Answers

Answer #1

Expected Return on portfolio = Weights of stock in portfolio * expected return of the stocks

Stocks Stock Weight for Portfolio S ( A) Stock Weight for Portfolio T ( B) Expected Return (C ) Expected Return on Portfolio S ( D = A*C) Expected Return on Portfolio T ( D = B*C)
INTC 0.2 0.2 15 3.0 3.0
MRK 0.2 0.3 25 5.0 7.5
MSFT 0.3 0.2 10 3.0 2.0
APPL 0.15 0 8 1.2 0.0
JPM 0.15 0.3 14 2.1 4.2
Total - 14.3 16.7

Expected Return on Portfolio S = 14.3%

Expected Return on Portfolio T = 16.7%

Stock Stock Weight for Portfolio S ( A) Amount Invested by Ouday in each stock ( A * 500000)
INTC 0.2 $100,000
MRK 0.2 $100,000
MSFT 0.3 $150,000
APPL 0.15 $75,000
JPM 0.15 $75,000
Total $500,000
Stock Stock Weight for Portfolio T ( B) Amount Invested by Ouday in each stock ( A * 500000)
INTC 0.2 $160,000
MRK 0.3 $240,000
MSFT 0.2 $160,000
APPL 0 $0
JPM 0.3 $240,000
Total $800,000

Expected Return on Oudays Portfolio = (500000* 14.3 + 800000 *16.7 ) / ( 500000 +800000)

= ( 7150000 + 13360000) / 1300000

= 20510000 / 1300000

= 15.77%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
S and T are two portfolios on the efficient frontier, the following table summarizes the weights...
S and T are two portfolios on the efficient frontier, the following table summarizes the weights of five stock in each portfolio Stock / Stock Weights for Portfolio S / Stock Weights for Portfolio T / Expected Return INTC 20% 20% 15% MRK 20% 30% 25% MSFT 30% 20% 10% APPL 15% 0% 8% JPM 15% 30% 14% a) Find the expected return of each portfolio. b) Ouday invests $500,000 in portfolio S and $800,000 in portfolio T. 1) What...
Calculate the missing values for the following four efficient portfolios. The expected return on the market...
Calculate the missing values for the following four efficient portfolios. The expected return on the market is 7 percent, with a standard deviation of 3 percent, and the risk-free rate is 2 percent. Portfolio Weight in Risk-free Asset Expected Portfolio Return Portfolio Standard Deviation A 15% 6.25% B 30% 5.50% C 45% 4.75% D 60% 4.00% E 75% 3.25%
Expected Return Standard Deviation          Stocks, S 14                          &nb
Expected Return Standard Deviation          Stocks, S 14                                           30           Bonds, B 6 15           The correlation between stocks and bonds is ρ(S,B) = 0.05 Note: I've entered the expected returns and standard deviations as whole numbers (not decimals)    Treat the risk-free rate as the number 2 not 0.02 or 2%. The risk-free rate is 2 percent. The CAL that is tangent to the portfolio frontier of stock and bonds has an expected return equal to 9.5 percent. You wish to...
Suppose you can form portfolios using only two stocks. Stock A and stock B, with the...
Suppose you can form portfolios using only two stocks. Stock A and stock B, with the following characteristics:(Total 15 points), , E(rA)=17% E(rB)=12% pab=0.2 Oa=30% Ob=20%. Find the portfolio weight on stock A that gives you a two-stock portfolio that has a standard deviation of 22%. (10 points) Hint: you will find two solutions and you should pick the efficient one
Risk Reduction in Portfolios You are given the following distributions of returns for assets (single stock...
Risk Reduction in Portfolios You are given the following distributions of returns for assets (single stock or portfolio) A, B, and C. Economic                                                                    Return on Asset Conditions                  Probability                               A         B         C Boom                              .30                                       60%     50%     10% Normal                            .40                                       40        30        50 Bust                                 .30                                       20        10        90 Find the expected return and standard deviation of B and C. (A’s expected return is 40% and its standard deviation is 15.49%)
A portfolio manager summarizes the input from the macro and micro forecasts in the following table:...
A portfolio manager summarizes the input from the macro and micro forecasts in the following table: Micro Forecasts Asset Expected Return (%) Beta Residual Standard Deviation (%) Stock A 18 2.00 50 Stock B 16 3.00 50 Macro Forecasts Asset Expected Return (%) Standard Deviation (%) T-bills 4 0 Passive Equity Portfolio (m) 14 20 a. Calculate expected excess returns, alpha values, and residual variances for these stocks. Instruction: Enter your answer as a percentage (rounded to two decimal places)...
Question 3 )Use adjusted prices for CVS Health Corporation (CVS), General Dynamics (GD), JPMorgan Chase &...
Question 3 )Use adjusted prices for CVS Health Corporation (CVS), General Dynamics (GD), JPMorgan Chase & Co. (JPM), and Kimberly-Clark Corporation (KMB), from December 31, 1987 to December 31, 2017 to answer the following questions. You can find the prices on Yahoo Finance. Assume risk-free rate to be 2.50%. Download month-end adjusted prices of common stocks for the four companies mentioned above. (When you download month-end price from Yahoo, it is going to show first day of the month, but...
A portfolio consists of two securities: a 90-day T-bill and the S&P/TSX Composite. The expected return...
A portfolio consists of two securities: a 90-day T-bill and the S&P/TSX Composite. The expected return on the T-bill is 4.5 percent. The expected return on the S&P/TSX Composite is 12 percent with a standard deviation of 20 percent. What is the portfolio standard deviation if the expected return for this portfolio is 15 percent? a) 8.13% b) 12.00% c) 16.80% d) 28.00%
Answer the following questions Lamis owns 100 shares of Stock S which has a price of...
Answer the following questions Lamis owns 100 shares of Stock S which has a price of $12 per share and 200 shares of Stock G which has a price of $3 per share. What is the proportion of Lamis's portfolio invested in stock S Answer 1 Choose... Check the following expected returns and standard deviations of assets in the table below which asset should be selected? Answer 2 Choose... The expected return and the standard deviation of returns for asset...
security beta Standard deviation Expected return S&P 500 1.0 20% 10% Risk free security 0 0...
security beta Standard deviation Expected return S&P 500 1.0 20% 10% Risk free security 0 0 4% Stock d ( ) 30% 13% Stock e 0.8 15% ( ) Stock f 1.2 25% ( ) 5) A complete portfolio of $1000 is composed of the risk free security and a risky portfolio, P, constructed with 2 risky securities, X and Y. The optimal weights of X and Y are 80% and 20% respectively. Given the risk free rate of 4%....