Question

you’ve formed an optimal 10-stock portfolio with an expected
return of 20% and standard deviation of 32%. an investor is willing
to spend her investment budget of $100,000 in shares of *Laggard
Corp.* which has an expected return of 12% and standard
deviation of 40%. You tell her that you can offer a much better
investment alternative with the same standard deviation of Laggard
and higher expected return. If the risk-free rate is 4% (lending or
borrowing), and given the information above, what would be the
expected return of the improved investment alternative?

Select one:

a. 20%

b. 32%

c. 24%

d. 16%

Answer #1

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Asset
E(R)
Std. deviation
A
12%
40%
B
20%
50%
Your optimal risky portfolio formed with the two stocks above (A
and B) has an expected return of 16% and a standard deviation of
32%. The risk-free rate is 4% and you have a risk-aversion
parameter of 3. What is the proportion of your investment in A, B,
and the risk-free asset, respectively, in your final portfolio?
A.
53.3%; 17.8%; 28.9%
B.
56.9%; 14.2%; 28.9%
C.
37.5%; 12.5%; 50.0%
D....

Stock X has an expected return of 12% and the standard deviation
of the expected return is 20%. Stock Z has an expected return of 7%
and the standard deviation of the expected return is 15%. The
correlation between the returns of the two stocks is +0.3. These
are the only two stocks in a hypothetical world. What is the
expected return and the standard deviation of a portfolio
consisting of 80% Stock X and 20% Stock Z?
Will any...

Stock X has an expected return of 12% and the standard deviation
of the expected return is 20%. Stock Z has an expected return of 7%
and the standard deviation of the expected return is 15%. The
correlation between the returns of the two stocks is +0.3. These
are the only two stocks in a hypothetical world.
What is the expected return and the standard deviation of a
portfolio consisting of 80% Stock X and 20% Stock Z? Will any...

Your optimal risky portfolio formed with the two stocks above (A
and B) has an expected return of 19% and a standard derivation of
32%. The risk-free rate is 4% and you have a risk-aversion
parameter of 3.
What is the proportion of your investment in A, B and the
risk-free asset, respectively, in your final portfolio?

Which of the following portfolios cannot be an optimal
portfolio?
Portfolio
Expected Return
Standard Deviation
X
10%
15%
Y
10%
25%
Z
15%
25%
Portfolio Y and Portfolio Z
Portfolio X and Portfolio Y
Portfolio Z
Portfolio Y

You have a portfolio with a standard deviation of
20 %20%
and an expected return of
16 %16%.
You are considering adding one of the two stocks in the
following table. If after adding the stock you will have
25 %25%
of your money in the new stock and
75 %75%
of your money in your existing portfolio, which one should you
add?
Expected
Return
Standard
Deviation
Correlation with
Your Portfolio's Returns
Stock A
1515%
2626%
0.40.4
Stock B
1515%...

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...

The expected return on the market portfolio is 13 percent with a
standard deviation of 16 percent. What are the expected return and
standard deviation for a portfolio with 40 percent of the
investment in the market portfolio borrowed at the risk-free rate
of 5 percent?
Expected return = 26.67%; expected return = 18.33%
Expected return = 18.33%; standard deviation = 26.67%
Expected return = 22.40%; standard deviation = 16.20%
Expected return = 16.20%; standard deviation = 22.40%

Stock A has an expected return of 18% and a standard deviation
of 33%. Stock B has an expected return of 13% and a standard
deviation of 17%. The risk-free rate is 3.6% and the correlation
between Stock A and Stock B is 0.2. Build the optimal risky
portfolio of Stock A and Stock B. What is the standard deviation of
this portfolio?

the expected return and standard deviation of S is 14% and 29%,
respectively. the expected return and standard deviation of B is 6%
and 15%, respectively. correlation between S and B is -0.1
T-bill rate is 1% and The client’s risk aversion (A) is 8
1- What is the expected return and standard deviation of the
optimal risky portfolio? 2-Find the proportion of the
optimal risky portfolio (= y) in your client’s complete
portfolio.
3-What is the expected return and standard...

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