local Philippine equities have the same risk (standard deviation) and return expectations: 10 % expected return and 20 % risk in terms of standard deviation. Suppose you wish to create an equally weighted portfolio (50% in each equity) to examine the effect of correlation on standard deviation/risk. Comment on the return and risk of portfolios with different correlations
Q: Morphosis Pty(Ltd) is an investment bank that plans to offer a bursary in five years time to one…
A: Annuity can be defined as a payment made in series of equal instalments at equal intervals of time.…
Q: A $140,000 mortgage was amortized over 25 years by monthly repayments. The interest rate on the…
A: Price of house $ 1,40,000.00 Time Period 25 Interest Rate 4.10%
Q: A company’s publicly listed shares: a. Can be traded on any share market around the world b.…
A: Listed shares are the common stocks of a corporation that are listed on a stock exchange and thereby…
Q: t the net cash flows below, what is the value of x if the rate of return is 107 (select the losest…
A: Year Net cash flow 0 -13000 1 -29000 2 -25000 3 X 4 -8000 Required rate of return =…
Q: Using the present value tables, which project will Ivanhoe choose? (Round answers to 3 decimal…
A: Profitability Index: The profitability index is a measure of an investment or project's…
Q: Classify the financial problem. Assume a 4% interest rate compounded annually. Find the value of a…
A: Future value deals with the value of money at a future date which is different from the value today…
Q: With a present value of $125,000, what is the size of the withdrawals that can be made at the end of…
A: Present value (PV) = $125,000 Period = 10 Years Quarterly periods (n) = 10*4 = 40 Interest rate =…
Q: Sebastopol Movie Theater will need $180,000 in 3 years to replace the seats. What deposit should be…
A: Future Value $ 1,80,000.00 Time Period 3 Interest Rate 0.80%
Q: a baker calculated the cost of ingredients fora bran mufTI cost.what is the selling price of a dozen…
A: The selling price is the price that the proprietor sets to ensure that they get the desired return…
Q: What is the present value (i.e., price) today of a bond that will pay its owner…
A: Maturity value (MV) = $1,000,000 Period (n) = 5 Years Discount rate (r) = 4%
Q: Question 5 Financial intelligence is defined as O Understanding the foundation O Understanding the…
A: Financial intelligence refers to skills and knowledge acquired from understanding accounting and…
Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery…
A: Net present value is the difference between the present value of cash inflow and present value of…
Q: One method of managing internal operations is to offer rewards or punishments to reinforce…
A: Reinforcement is a phrase used in behavioral analysis and operant conditioning, which is a type of…
Q: Compute the net cash provided by operating activities.
A: Cash flows from operating activities refer to the inflow and outflow of cash related to business…
Q: man deposits P500 in a credit union at the end of each year for 5 years. The credit union pays 5%…
A: We can calculate the amount by applying the required formula and we will take the interest as…
Q: A financial analyst considers three funds. The funds' estimated returns depend on future economic…
A: OUTCOME PROBABILITY FUND M FUND N FUND P A 10.00% -10.00% -25.00% 10.00% B 30.00% 8.00% 10.00%…
Q: Cash Flow (1,650,000) 330,000 365,000 380,000 415,000 405,000 370000 294,000 Insert your…
A: Required rate of return = 15% Year Cash flow 0 -1650000 1 330000 2 365000 3 380000 4…
Q: I. 1. Consider stocks A and B with the following past returns: Month 1 A 3 4 4% 6% 8% | 2% в 10% 8%…
A: Weight of A is 30% Weight of B is 70% To Find: Contribution of Stock B in standard deviation of…
Q: You decide to provide yourself with a retirement account by depositing X into an account at the…
A: An immediate annuity is an ordinary annuity where the payments start immediately after being…
Q: The AUD/$ spot exchange rate is 1.60 and the SF/$ is 1.25. The AUD/SF cross exchange rate is: 0.7813…
A: (Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…
Q: Find the monthly payment for the loan. (Round your answer to the nearest cent.) Finance $856,000…
A: The monthly payment on the loan can be calculated with the help of present value of annuity function
Q: I. 1. Consider stocks A and B with the following past returns: Month 1 2 3 4 A 4% 6% 8% 2% В 10% 8%…
A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…
Q: A. Using the information above, Draw the shape of the German spot yield curve (does not need to be…
A: Data given: Maturity(T) Spot rate (%) r(1) -0.47 r(2) -0.56 r(3) -0.54 r(4) -0.48 r(5)…
Q: What does a negative value for unlevered free cash flow imply for the claimants of a firm
A: Unlevered free cash flow for a company is that free cash flow which is determined and computed…
Q: What is the cash value of an electronic gadget which was bought with a down payment of P20,000 and a…
A: Cash Value: It is the value of a property or equipment and is computed by the sum of the down…
Q: A stock price is currently $51. It is assumed that at the end of six months it will be either $30 or…
A: Binomial model is one of the methods of option pricing. It calculates the option price by…
Q: beta and expected return
A: : Beta refers to the measurement of stock movement in relation to the overall market. A beta greater…
Q: . If Reuben accepts the offer, what will the effect on profit be?
A: Presently the total cost to make the rolls = 0.24 + 0.39 + 0.15 + 0.20 = $ 0.98 Potential seller is…
Q: A price level adjusted mortgage (PLAM) is made with the following terms: Amount $95,800 Initial…
A: Given: Particulars Amount Amount $95,800 Interest rate 4% Term 30 Points 6% Inflation…
Q: What are the basic risks faced by financial intermediaries? Discuss each thoroughly.
A: The following are the basic risks that financial intermediaries face: 1. Interest rate risk: This…
Q: êBöök he assets of Dallas & Associates consist entirely of current assets and net plant and…
A: Balance Sheet A balance sheet is a statement which provides financial data related to the assets,…
Q: Find the monthly payment for the loan. (Round your answer to the nearest cent.) A $253,000…
A: The monthly payment can be calculated with the help of present value of annuity
Q: An option free bond’s value/price has an inverse relationship with interest rates/yield. If yields…
A: Bond valuation refers to a method which is used to compute the current value or present value (PV)…
Q: Asset A has 3 units of exposure to factor 1 risk and 1 unit of exposure to factor 2 risk and has…
A: We will first take the value of the first factor as x and the second factor as y, then we will solve…
Q: What is the present value (i.e., price) today of a bond that will pay its owner…
A: Maturity value = $ 1000000 Life of bond = 5 years discount rate = 4% Price of the bond today = ?
Q: Booker graduated from Baruch 10 years ago and now wants to buy his first condo. He has saved enough…
A: Given: Particulars Amount Years 10 Savings $100,000 Loan $400,000 New home $500,000
Q: Starbucks (Croatia). Starbucks opened its first store in Zagreb, Croatia, in October 2010. In…
A: Given, The price in Croatia is 25.66 Croatian kunas The price in New York is $2.65 Exchange rate is…
Q: What is the size of the payments that must be deposited at the beginning of each 6-month period in…
A: Future value (FV) = $150,000 Interest rate = 7.6% Semi annual rate (r) = 7.6%/2 = 3.80% Period = 18…
Q: An investment banker would like to receive $1,200 at the beginning of every 3 months from her…
A: Quarterly receipt = $1200 Interest rate = 3.3% Quarterly interest rate = 3.3%/4 = 0.825% Payment…
Q: Betty borrows $20,000 from the bank. For a five-year loan, the bank requires annual end-of-year…
A: The interest rate on the loan can be calculated with the help of RATE function of Excel
Q: The security market line depicts: a. Expected return as a function of systematic risk (indicated…
A: The security market line (SML) is a graphical representation of the capital asset pricing model…
Q: are used to measure the speed in which various accounts are converted into sales or cash. Select…
A: Correct Option is 'C' =Activity Ratios
Q: What does Financing mean? What is involved in an organization's finances? What does financing…
A: The process of obtaining cash or capital for any type of spending is known as finance. The handling…
Q: 6. Given the following information for Computech, compute the firm's degree of combined leverage…
A: Since: Degree of combined Leverage=Percentage change in EPSPercentage change in sales here…
Q: Acort Industries has 15 million shares outstanding and a current share price of $44 per share. It…
A: WACC: The WACC (weighted average cost of capital) is a financial measure that determines how much a…
Q: the firm have a yield rate of 8.1%. Bonds with a similar debt rating has a default rate of 3.1% and…
A: Beta and Equity Beta: The beta of a stock is a measure of the systematic risk of a stock relative…
Q: 2. A debt of $410 due 3 months ago and $760 due in 10 months are to be settled by two equal…
A: Given, Debt = $410 due 3 months ago Debt = $760 due in 10 months
Q: bugh Syron Books Inc. recently reported $18 million of net income. Its EBIT was $25.2 million, and…
A: First we need to calculate earning before tax by using this equation Earning before tax =Net…
Q: What is the quarterly payment of Sonia if she borrowed P300,000 at 7% compounded quarterly that she…
A: Loan amount (PV) = P300,000 Interest rate = 7% Quarterly interest rate (r) = 7%/4 = 1.75% Period = 4…
Q: 1. 1. The average variance of financial assets on a market is 0.4% and the average covariance tween…
A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…
2 local Philippine equities have the same risk (standard deviation) and return expectations: 10 % expected return and 20 % risk in terms of standard deviation. Suppose you wish to create an equally weighted portfolio (50% in each equity) to examine the effect of correlation on standard deviation/risk.
Comment on the return and risk of portfolios with different correlations
Step by step
Solved in 2 steps with 2 images
- 2 local Philippine equities have the same risk (standard deviation) and return expectations: 10 % expected return and 20 % risk in terms of standard deviation. Suppose you wish to create an equally weighted portfolio (50% in each equity) to examine the effect of correlation on standard deviation/risk. Calculate the expected portfolio return and risk if the correlation is 1.0.Portfolio manager wants to optimize the riskiness of the two assets portfolio with the given statistics below:- Assets Return Volatility Weight A 17.00% 15.00% 40.00% B 21.00% 25.00% 60.00% Correlation -0.70 -0.35 0.25 0.50 0.70 Requirements Calculate the two assets portfolio standard deviation at different correlation levels which are mentioned above and suggest at which correlation is best suits to your portfolio.1. Given the following summary statistics, Mean S.D. 1.235 0.997 Asset A 0.52 Asset B. 0.44 (a) If the correlation between the two financial series is 0.25. What are the optimal portfolio weights to minimize risk? (b) What are the expected return and standard deviation of the optimal port- folio? (c) Compute the 1% Value-at-Risk for the next 5 days (d) Compute the expected shortfall
- You are evaluating various investment opportunities currently available and you have calculated expected returns and standard deviations for five different well-diversified portfolios of risky assets:Portfolio Expected Return Standard DeviationQ 7.8% 10.5%R 10.0 14.0S 4.6 5.0T 11.7 18.5U 6.2 7.5a. For each portfolio, calculate the risk premium per unit of risk that you expect to receive ([E(R) − RFR]/σ). Assume that the risk-free rate is 3.0 percent.b. Using your computations in Part a, explain which of these five portfolios is most likely tobe the market portfolio. Use your calculations to draw the capital market line (CML).c. If you are only willing to make an investment with σ = 7.0%, is it possible for you toearn a return of 7.0 percent?d. What is the minimum level of risk that would be necessary for an investment to earn7.0 percent? What is the composition of the portfolio along the CML that will generatethat expected return?e. Suppose you are now willing to make an investment…You are evaluating various investment opportunities currently available and you have calculated expected returns and standard deviation for five different well-diversified portfolios of risky assets. Portfolio Expected return (%) Standard deviation (%) Q 7.8 10.5 R 10 14 S 4.6 5 11.7 18.5 6.2 7.5 a. For each portfolio, determine the Sharpe ratio. Assume that the risk free rate is 3%. b. Using your analysis in part (a), explain which of these five portfolios is most likely to be the market portfolio. Draw up the Capital Market Line Equation. c. If you are willing to make an investment with a standard deviation of 7%, is it possible for you to earn 7%? d. What is the minimum risk level that would be necessary for an investment to earn 7%. What is the composition of the portfolio along the CML that will generate the 7% return. e. Suppose you are now willing t f. Devise how would you apply portfolio performance evaluation and attribution analysis in practice. Illustrate with suitable…Which of the following will be a part of Efficient Frontier? A B C D E F Return (%) 8 8 12 4 9 8 Risk (Standard deviation) 4 5 12 4 5 6 Plot them in Risk return graph. Assuming correlation between A and C as 0.3, find the risk and return of the portfolio with 75 % proportion in A and 25 % in C, also interpret the result of such diversification.
- You are evaluating various investment opportunities currently available and you have calculated expected returns and standard deviation for five different well-diversified portfolios of risky assets. Portfolio Expected return (%) Standard deviation (%) 7.8 10.5 R 10 14 S 4.6 11.7 18.5 6.2 7,5 a. For each portfolio, determine the Sharpe ratio. Assume that the risk free rate is 3%. b. Using your analysis in part (a), explain which of these five portfolios is most likely to be the market portfolio. Draw up the Capital Market Line Equation. c. If you are willing to make an investment with a standard deviation of 7%, is it possible for you to earn 7%? d. What is the minimum risk level that would be necessary for an investment to earn 7%. What is the composition of the portfolio along the CML that will generate the 7% return. e. Suppose you are now willing to make an investment with a standard deviation of 18.2%. Determine what would be the investment proportions in the risk free asset and…As a portfolio manager, you are required to take investment decision from the following two alternative scenarios: (Decision Criterion: Select a portfolio on relative risk basis) Scenario 1: Construct a portfolio with 60% investment in ICC: Expected Return (in %) Risk (as Std Div.) Covariance BPL 12 4 BPL & ICC: -1.2 ICC 7 2 Scenario 2: Construct equal weighted portfolios from following securities Expected Return (in %) Risk (as Std Div.) Covariance PSL 11 5 PSL & IPL: 3.75 IPL 8 3QUESTIONS: 1) Assuming that the risk-free rate of return is currently 3,2%, the market risk premium is 6% whereas the beta of HelloFresh SH. stock is 1.8, compute the required rate of return using CAPM. 2) Compute the value of each investment based on your required rate of return and interpret the results comparing with the market values. 3) Which investment would you select? Explain why using appropriate financial jargon (language). 4) Assume HelloFresh SH's CFO Mr. Christian Gaertner expects an earnings upturn resulting increase in growth (rate) of 1%. How does this affect your answers to Question 2 and 3? 5) AACSB Critical Thinking Questions: A) Companies pay rating agencies such as Moody's and S&P to rate their bonds, and the costs can be substantial. However, companies are not required to have their bonds rated in the first place; doing so is strictly voluntary. Why do you think they do it? (Textbook page: 198) B) What are the difficulties in using the PE ratio to value stock?…
- Suppose the total risk of Portfolios A, B and C are 49% ², 64%² and 100% ² respectively. The market price of risk is 8%. The Market Portfolio (M) has an expected return and a total risk of 11% and 100% respectively. (a) You want to form another Portfolio H by investing $7,000 in Portfolio A and $3,000 in Portfolio B. Compute the standard deviation of Portfolio H if the correlation coefficient between Portfolio A and Portfolio B is: i) perfectly positively correlated ii) uncorrelated iii) perfectly negatively correlated (b) If the expected return of Portfolio C is 9.4% and it is lying on the Securities Market Line, what is the beta of Portfolio C? State the answer in %². (c) Is Portfolio C a Market Portfolio as it has same level of total risk (i.e. 100% 2) as the Market Portfolio? Why or Why not?Suppose the risk-free rate is 6 percent and the market portfolio has an expected return of 12 percent. The market portfolio has a standard deviation of 7 percent. Portfolio Z has a correlation coefficient with the market of 0.35 and standard deviation of 6 percent. According to the capital asset pricing model, what is the expected return on portfolio Z a. 12.6 percent b. 7.8 percent c. 9.87 percent d. 12.05 percentTable attached shows the historical returns for Companies A, B and C If one investor has a portfolio consisting of 50% Company A and 50% Company B, what are the average portfolio return and standard deviation? What is Sharpe ratio if the risk-free rate is 3.8%? If another investor has a portfolio consisting of 1/3 Company A, 1/3 Company B and 1/3 Company C, what are the average portfolio return and standard deviation? What is Sharpe ratio if the risk-free rate is 3.8%?