Question

You invest 40% in a risky portfolio, and 60% in a treasury bill. The risky portfolio has an expected return of 15% and a standard deviation of 25%. The treasury bill pays 7%. Suppose that your risky portfolio includes the following investments in the given proportions: Stock A 30%Stock B 30%Stock C 30%Stock D 10%(a)(3 points) What are the investment proportions in the complete portfolio, including stock A, B, C, D and the Treasury bill? (b)(3 points) What is the expected return and standard deviation of your complete portfolio?

Answer #1

Given about complete portfolio,

invested Wr = 40% in a risky portfolio, and Wf = 60% in a treasury bill.

Expected return on risky portfolio Rr = 15%

Standard deviation of risky portfolio SDr =25%

Risk free rate Rf = 7%

Risky portfolio includes, 30% stock A, 30% stock B, 30% stock C and 10% stock D

a). Investment proportion of each asset in complete portfolio is

Proportion of stock A in complete portfolio = 30% of 40% = 12%

Proportion of stock B in complete portfolio = 30% of 40% = 12%

Proportion of stock C in complete portfolio = 30% of 40% = 12%

Proportion of stock D in complete portfolio = 10% of 40% = 4%\

Proportion in T-bill = 60%

b). Expected return on complete portfolio is weighted average return on its assets

=> Expected return on complete portfolio = Wr*Rr + Wf*Rf = 0.4*15 + 0.6*7 = 10.20%

standard deviation of complete portfolio = Wr*SDr = 0.4*25 = 10%

You manage a risky portfolio with an expected rate of return of
20% and a standard deviation of 36%. The T-bill rate is 5%. Your
client chooses to invest 60% of a portfolio in your fund and 40% in
a T-bill money market fund.
Suppose that your risky portfolio includes the following
investments in the given proportions:
Stock A
35
%
Stock B
36
%
Stock C
29
%
What are the investment proportions of your client’s overall
portfolio, including...

Assume that you manage a risky portfolio with an expected rate
of return of 15% and a standard deviation of 39%. The T-bill rate
is 6%. Your client chooses to invest 70% of a portfolio in your
fund and 30% in a T-bill money market fund.
a. What is the expected return and standard
deviation of your client's portfolio? (Round your answers
to 2 decimal places.)
Expected return
% per year
Standard deviation
% per year
b. Suppose your risky...

Assume that you manage a risky portfolio with an expected rate
of return of 14% and a standard deviation of 30%. The T-bill rate
is 6%. Your client chooses to invest 85% of a portfolio in your
fund and 15% in a T-bill money market fund.
a. What is the expected return and standard
deviation of your client's portfolio? (Round your answers
to 2 decimal places.)
Expected return
% per year
Standard deviation
% per year
b. Suppose your risky...

You invest $100 in a complete portfolio. The complete portfolio
is composed of a risky asset with an expected rate of return of 12%
and a standard deviation of 10% and a treasury bill with a rate of
return of 5%.
What would be the weight of your investment allocated to the
risk-free asset if you want to have a portfolio standard deviation
of 9%? (2 points)
How could you use these two investments to generate an expected
return of...

You manage a risky portfolio with an expected rate of return of
22% and a standard deviation of 35%. The T-bill rate is 6%. Your
client chooses to invest 75% of a portfolio in your fund and 25% in
a T-bill money market fund.
Suppose that your risky portfolio includes the following
investments in the given proportions:
Stock A
33
%
Stock B
36
%
Stock C
31
%
What are the investment proportions of your client’s overall
portfolio, including...

4) Assume that you manage a risky portfolio with an expected
rate of return of 17% and a standard deviation of 43%. The T-bill
rate is 4%. Your client chooses to invest 70% of a portfolio in
your fund and 30% in a T-bill money market fund.
a. What is the expected return and standard
deviation of your client's portfolio? (Round your answers
to 2 decimal places.)
Expected return
% per year
Standard deviation
% per year
b. Suppose your...

Assume that you manage a risky portfolio with an expected rate
of return of 15% and a standard deviation of 30%. The T-bill rate
is 5%. Your client chooses to invest 120% of a portfolio in your
fund and -20% in a T-bill money market fund.
a. Suppose your risky
portfolio includes the following investments in the given
proportions:
Stock A 30%
Stock B 50%
Stock C 20%
What are the investment proportions of
your client’s overall portfolio, including the...

You are managing a risky portfolio with an expected rate of
return of 17% and a standard deviation of 27%. You think that this
risky portfolio is best one that you can construct to deliver the
best tradeoff between risk premium and return. The T-bill rate is
7%.
(1)Your client Eric chooses to invest
70% of a portfolio in your fund and 30% in a T-bill money market
fund.
(a) What is the expected return and
standard deviation of your...

Assume that you manage a risky portfolio with an expected rate
of return of 13% and a standard deviation of 45%. The T-bill rate
is 6%. Your client chooses to invest 75% of a portfolio in your
fund and 25% in a T-bill money market fund.
a. What is the expected return and standard
deviation of your client's portfolio? (Round your answers
to 2 decimal places.)
Expected return
?%
Standard deviation
? %
b. Suppose your risky portfolio includes the...

Assume that you are managing a risky portfolio with expected
rate of return of 18% and standard deviation of 28%. The T-bill
rate is 8%. Your client chooses to invest 70% of a portfolio in
your fund and 30% in a T-bill money market fund. Also, the client’s
expected return of the portfolio is 15% and the standard deviation
of the rate of return on his portfolio is 19.6%.
Suppose that your risky portfolio includes the following
investments in the...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 4 minutes ago

asked 13 minutes ago

asked 41 minutes ago

asked 55 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago