Question

11. How does an investor’s preference shift with the introduction of the risk free asset?

Answer #1

A risk free asset has certain rate of return and there is no possibility that they Will go worthless so there is a high sense of security provided to investors who invest in such securities.

The rate of return of such risk free Assets always remains low and there is low risk exposure & virtually no possibility of making any kind of losses so it is highly appropriate for investors who are looking for low return and highly conservative with a high degree of Risk aversion.

So Risk free assets are guaranteed against any kind of loss in value but it's purchasing power can go down based upon the different situations in economies.

It is highly preferred at the time when there is a very high level of uncertainty and there is low growth and very high volatility in equity markets , These risk free assets provides with a safe heaven.

The risk-free rate is 3%. Asset A has beta of 0.8 and expected
return of 11%. If asset B has expected return 15%, what must be the
beta for Asset B?

How a risk neutral investor allocates her asset between a risk
free security and a risky asset. The risk-free return is 5% and the
return of the risky asset is 7% with a standard deviation of
4%.

The return on the risky portfolio is 15%. The risk-free rate, as
well as the investor’s borrowing rate, is 10%. The standard
deviation of return on the risky portfolio is 20%. If the standard
deviation on the complete portfolio is 25%, the expected return on
the complete portfolio is ________.
6%
8.75 %
10%
16.25%

To maximize your utility what would be your allocation in the
risk-free asset?
risk-free asset with a return of 15%, Standard Deviation of 40%,
and risk-free asset with risk-free= 5%, Pab= -1

You have one risk-free asset and one risky stock in your
portfolio. The risk-free asset has an expected return of 5.8
percent. The risky stock has a beta of 1.8 and an expected return
of 12.3 percent. What's the expected return on the portfolio if the
portfolio beta is .958?

Consider an economy consisting of two stocks (X and Y) and a
risk-free asset. Investor A maximizes his utility function by
investing 10% of his wealth in the risk-free asset, 75% in X, and
15% in Y. Investor B maximizes his utility function by investing
40% of his wealth in the risk-free asset. What fraction of his
wealth does investor B invest in X?
A.
15%
B.
60%
C.
37.5%
D.
50%

Design a complete portfoilio with the Risky asset S and risk
free asset that yields the expected return of 10%. What is the
weight you invest on Asset S?
Asset S: E(r)=15% Standard Deviation=20%
Risk free: E(r)= 6%
A. 44.4
B.37.9
C.50.6
D. 41.09

How an investor’s risk attitude and/or wealth play a role on
his/her selection of a financial institution or intermediary, and
how an investor seeking a moderate return on investment would
select a financial institution or intermediary.

Mr. Rakesh Jhunjhunwala has created a portfolio consisting of a
stock and a risk-free asset. The stock’s expected return is 16% and
beta is 1.2. The risk-free asset earns 5% rate of return. Suppose
the beta of his portfolio is 0.75, what are the weights of the
stock and the risk-free asset in his portfolio?
0
I do not want to answer this Question
1
The weight of the stock is 30% and the weight of the risk-free
asset is...

A risk free asset is an asset with
Select one:
a. A variance of -1
b. A variance of 0
c. A variance of 1
d. None of the above

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 5 minutes ago

asked 5 minutes ago

asked 6 minutes ago

asked 10 minutes ago

asked 15 minutes ago

asked 24 minutes ago

asked 26 minutes ago

asked 26 minutes ago

asked 28 minutes ago

asked 28 minutes ago

asked 29 minutes ago

asked 30 minutes ago