Question

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. You have previously computed that, assuming the beta of your actively managed portfolio is 1, you should put 52% of your money in the active portfolio, and the rest in the index fund. If the beta of your actively managed portfolio is actually 0.8, what percent of your money should you put in the active portfolio?

-The answer is 0.471
How do you get this value? Please show all work.

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

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
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...
You are attempting to build a portfolio using the index model method, and are currently trying...
You are attempting to build a portfolio using the index model method, and are currently trying to find the composition of your actively managed portfolio, which will consist of two assets with the following characteristics: Asset Alpha Beta Firm-specific Variance 1 0.013 1.47 0.295 2 0.012 1.8 0.063 What percentage of your active portfolio will be made of Asset 1?
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...
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...
Using the index model, if the beta of your actively managed portfolio is greater than 1,...
Using the index model, if the beta of your actively managed portfolio is greater than 1, you should: a. Increase the proportion of your portfolio invested in the market index to improve your diversification b. Decrease the proportion of your portfolio invested in the market index to increase your alpha c. Increase the proportion of your portfolio invested in the market index to increase your alpha d. Decrease the proportion of your portfolio invested in the market index to improve...
You are trying to assess the risk and return of your portfolio. You put a quarter...
You are trying to assess the risk and return of your portfolio. You put a quarter of your money in small stocks with a beta of 2.8 and an expected return of 18%. You put half your money in large stocks with a beta of 1.8 and an expected return of 12%. You invest one-eighth of your money in a well-diversified portfolio like the S&P 500 index with a beta of 1 and an expected return of 8%, and the...
you want to create a portfolio equally as risky as the market, and you have $100,000...
you want to create a portfolio equally as risky as the market, and you have $100,000 to invest. In your portfolio, you want to invest in Stock A, Stock B, and a risk-free asset. You want to invest $30,000 in Stock A and the beta of Stock A is 0.80. The beta of Stock B is 30. What is the market beta? What is the beta of the risk-free asset? How much should you invest in Stock B and the...
Explain how by using the S&P 500 index you may try to build a portfolio that...
Explain how by using the S&P 500 index you may try to build a portfolio that may beat (outperform) the S&P 500 index results in both return and risk?
You are managing a risky portfolio with an expected return of 15%, a variance of 0.0784,...
You are managing a risky portfolio with an expected return of 15%, a variance of 0.0784, and a beta of 1.4. Suppose that the T-bill rate is 5% and the S&P500 stock index (as the market index) has an expected return of 10% and a variance of 0.04. Your client chose to invest 80% of her portfolio in your fund and the rest in a T-bill money market fund. What is the Treynor ratio of your client’s portfolio? A. 0.3571...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT