Question

Suppose you invest equal amounts in a portfolio with an expected return of 12% and a standard deviation of returns of 16% and a risk-free asset with an interest rate of 2%. calculate the expected return on the resulting Portfolio.

A. 9%

B. unable to determine without knowing the correlation coefficient

C. 8%

D. 7%

E. 12%

F. 2%

SHOW WORK PLEASE

Answer #1

The return of a portfolio is the weighted average return of the securities which constitute the porfolio. Here you invest equal amounts in both the securities, weight will be 50%.

Stock |
Weight |
Expected Return (%) |
Weight*Expected Return |

portfolio | 0.50 | 12.00 | 6.00 |

Risk free asset | 0.50 | 2.00 | 1.00 |

**Portfolio Return = Weight*Expected
Return**

**=** 6+1

= **7%**

Since the weights are same, it can also be calculated as average of returns.

8. Assume that you invest equal amounts in a portfolio with an
expected return of 16 percent and a standard deviation of returns
of 18 percent and a risk-free asset with an interest rate of 4
percent. Calculate the standard deviation of the returns on the
resulting portfolio

8. Assume that you invest equal amounts in a portfolio with an
expected return of 16 percent and a standard deviation of returns
of 18 percent and a risk-free asset with an interest rate of 4
percent. Calculate the standard deviation of the returns on the
resulting portfolio

you manage a portfolio of stocks with an expected return of 12%
and a standard de of 16%. Additionally, you have available a risk
free asset with a return of 4.5%.
a) your client wants to invest a proportion of her total
investment in your risky portfolio to provide an expected rate of
return on her overall portfolio equal to 8%should she in the risky
portfolio P, and what proportion in the risk free asset?
b) what will be the...

5)
A portfolio that combines the risk free asset and the market
portfolio has an expected return of 7% and a standard deviation of
10%. The risk free rate is 4%, and the market returns (expected) is
12%. What expected return would a security earn if it had a
correlation of 0.45 ewth the market portfolio and a standard
deviation of 55%.?
Suppose the risk free rate is 4.8% and the market portfolio has
an expected return of 11.4%. the...

You are given the opportunity to invest in a well-diversified
portfolio with expected return of 12% and beta of 1.5. The
risk-free rate is 2% and the market risk premium is 8%. Should you
invest?

You invest $100 in a portfolio of stock JET and a risk-free
asset with a return of 5%. JET has an expected return of 12% and a
standard deviation of 10%. What is the percentage of your portfolio
in the risk-free asset if your portfolio’s standard deviation is
9%?
A. 30%
B. 90%
C. 50%
D. 10%

You invest $100 in a portfolio of stock JET and a risk-free
asset with a return of 5%. JET has an expected return of 12% and a
standard deviation of 10%. What is the percentage of your portfolio
in the risk-free asset if your portfolio’s standard deviation is
9%? A. 30% B. 90% C. 50% D. 10%

The market is expected to yield 12% and the risk free rate is
2%. You currently hold a portfolio with a beta of 0.75 worth
$25,000. You want to invest in another portfolio with a beta of
2.9. How much will you have to invest in the new risky asset so
that the resulting portfolio will have an expected return of
16%?

1. There are 2 assets you can invest in: a risky portfolio with
an expected return of 6% and volatility of 15%, and a government
t-bill (always used as the 'risk-free' asset) with a guaranteed
return of 1%. Your risk-aversion coefficient A = 4, and the utility
you get from your investment portfolio can be described in the
standard way as U = E(r) - 1/2 * A * variance. Assume that you can
borrow money at the risk-free rate....

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...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 18 minutes ago

asked 33 minutes ago

asked 33 minutes 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

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago