Question

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 amount of his portfolio will be invested in each stock? 2) Find the expected return of Ouday’s portfolio

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
a] Stock Weights Expected Return
Stock Portfolio S Portfolio T Stock Portfolio S Portfolio T
INTC 20% 20% 15% 3.00% 3.00%
MRK 20% 30% 25% 5.00% 7.50%
MSFT 30% 20% 10% 3.00% 2.00%
APPL 15% 0% 8% 1.20% 0.00%
JPM 15% 30% 14% 2.10% 4.20%
14.30% 16.70%
a] Expected portfolio:
Portfolio S 14.30%
Portfolio T 16.70%
b] Weight of S = 500000/1300000 = 38.46%
Weight of T = 800000/1300000 = 61.54%
c] Expected return of portfolio = 14.30%*38.46%+16.70%*61.54% = 15.78%
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
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...
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%
Different investor weights. Two risky portfolios exist for​ investing: one is a bond portfolio with a...
Different investor weights. Two risky portfolios exist for​ investing: one is a bond portfolio with a beta of 0.5 and an expected return of 8.3​%, and the other is an equity portfolio with a beta of 1.2 and an expected return of 16.4​%. If these portfolios are the only two available assets for​ investing, what combination of these two assets will give the following investors their desired level of expected​ return? What is the beta of each​ investor's combined bond...
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...
Calculate the Sharpe ratio of each of the three portfolios in Problem 40 (the initial portfolio...
Calculate the Sharpe ratio of each of the three portfolios in Problem 40 (the initial portfolio with 0% invested in Hannah, the second portfolio with 40% invested in Hannah, and the third portfolio with 15% invested in Hannah). What portfolio weight in Hannah stock maximizes the Sharpe ratio? Problem#40 You are currently only invested in the Natasha Fund (aside from risk-free securities). It has an expected return of 14% with a volatility of 20%. Currently, the risk-free rate of interest...
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
. Stock S is expected to return 12 percent in a boom and 6 percent in...
. Stock S is expected to return 12 percent in a boom and 6 percent in a normal economy. Stock T is expected to return 20 percent in a boom and 4 percent in a normal economy. There is a probability of 40 percent that the economy will boom; otherwise, it will be normal. What is the portfolio variance and standard deviation if 30 percent of the portfolio is invested in Stock S and 70 percent is invested in Stock...
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...
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)...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT