Question

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% | |||

Answer #1

Standard Deviation on Risky Assets = 3%

Standard Deviation of Risk-free Asset = 0%

Portfolio Standard Deviation = Weight of Risky Assets * Standard
Deviation on Risky Assets

Portfolio Standard Deviation = (1 - Weight of Risk-free Asset) *
Standard Deviation on Risky Assets

Portfolio A:

Portfolio Standard Deviation = (1 - 0.15) * 7%

Portfolio Standard Deviation = 5.95%

Portfolio B:

Portfolio Standard Deviation = (1 - 0.30) * 7%

Portfolio Standard Deviation = 4.90%

Portfolio C:

Portfolio Standard Deviation = (1 - 0.45) * 7%

Portfolio Standard Deviation = 3.85%

Portfolio D:

Portfolio Standard Deviation = (1 - 0.60) * 7%

Portfolio Standard Deviation = 2.80%

Portfolio E:

Portfolio Standard Deviation = (1 - 0.75) * 7%

Portfolio Standard Deviation = 1.75%

Which one of the following portfolios is not efficient?
Portfolio
Expected Return
Standard Deviation
A
9%
21%
B
5%
7%
C
15%
36%
D
12%
15%

Suppose Asset A has an expected return of 10% and a standard
deviation of 20%. Asset B has an expected return of 16% and a
standard deviation of 40%. If the correlation between A and B is
0.35, what are the expected return and standard deviation for a
portfolio consisting of 30% Asset A and 70% Asset B?
Plot the attainable portfolios for a correlation of 0.35. Now
plot the attainable portfolios for correlations of +1.0 and
−1.0.
Suppose a...

Which of the following statements is (are) false? Question
options:
a. All mean-variance efficient portfolios are combinations of
the market portfolio and the risk-free asset
b. If two mean-variance efficient portfolios are combined, the
result is a mean-variance efficient portfolio
c. If the market portfolio is the tangency portfolio, then the
relationship between risk and return is best described as
parabolic
d. All of the above are true statements

A portfolio that combines the risk-free asset and the market
portfolio has an expected return of 7.4 percent and a standard
deviation of 10.4 percent. The risk-free rate is 4.4 percent, and
the expected return on the market portfolio is 12.4 percent. Assume
the capital asset pricing model holds.
What expected rate of return would a security earn if it had a .49
correlation with the market portfolio and a standard deviation of
55.4 percent? Enter your answer as a percent...

Which of the following statements is (are) false? Question
options:
a. All mean-variance efficient portfolios are combinations of
the market portfolio and the risk-free asset
b. If two mean-variance efficient portfolios are combined, the
result is a mean-variance efficient portfolio
c. If the market portfolio is the tangency portfolio, then the
relationship between risk and return is best described as
parabolic
d. All of the above are true statements
(already picked "b" and it was wrong).

Security Y is a risk-free security with an expected return of
5%. Security Z has an expected return of 10% with an associated
standard deviation of 28%. Find the expected portfolio return and
standard deviation for the following portfolios:
Weight of Y
Weight of Z
20%
80%
40%
60%
60%
40%
80%
20%
Does the slope of the expected portfolio return versus portfolio
risk (measured as standard deviation) change? Answer this question
by comparing the slope between the first two...

(a)
Based on the return and risk profile of the four portfolios
below, discuss which portfolio cannot lie on the
efficient frontier as described by Markowitz?
Portfolio
Expected Return Standard
Deviation
U
9%
21%
V
5%
7%
W
15%
36%
X
12%
15%
(b)
Draw a kinked capital allocation (CAL) line first. And then
discuss what causes the line to be kinked.

5. The market portfolio expected return is 6% and its standard
deviation is 15%. The risk-free rate is 0.5%. What are the expected
return and the standard deviation of the portfolio that invests 50%
in the risk-free asset and 50% in the market?

The characteristics of four portfolios are shown
below:
Standard deviation
Expected return
%
%
Portfolio W
14
13
Portfolio X
26
16
Portfolio Y
15
11
Portfolio Z
10
7
Which portfolio would a risk-averse
investor immediately reject?
A Portfolio W
B Portfolio X
C Portfolio Y
D Portfolio Z

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...

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