A portfolio has a correlation of 0.40 with the overall market and produces a Sharpe Ratio of 0.2. If the market's volatility is 20%, what is portfolio's *Trevnor ratio* ?

Q: Suppose the risk-free rate is 5.1 percent and the market portfolio has an expected return of 11.8…

A: Standard deviation of market portfolio and portfolio Z is calculated. Then covariance and beta of…

Q: Equity has a beta of 0.9 and an expected return of 9%. A risk free asset currently earns 2%.(a) What…

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…

Q: The return on Stock A is 20%, 10 %, and -25% when the market condition is good, normal, and bad,…

A: Co-variance is shows the relationship between the two stock returns and standard deviation.

Q: c) Assume that using the Security Market Line (SML) the required rate of return (Ra) on stock A is…

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Q: 2. Consider a market with an expected return of 20%, a risk (o) of 25% and a risk-free rate of 7%.…

A: Portfolio Risk: Portfolio risk refers to the degree of uncertainty or variability in the returns of…

Q: the simple is valid and all portfolios are priced correct hich of the situations below is possible?…

A: Capital Asset Pricing Model:It is a financial model that estimates an investment's or asset's…

Q: Table attached shows the historical returns for Companies A, B and C If one investor has a…

A: The expected return of the stock refers to the profits that the stock provides on average. It is…

Q: A portfolio has a total return of 4.5%, a standard deviation of 40%, and a beta of 0.5. The market…

A: Market return, Rm = 12%Standard deviation of market return = 20% Market's treynor measure = 0.10 We…

Q: Consider the two (excess return) index model regression results for well-diversified portfolios A…

A: We have the two (excess return) index model regression results for well-diversified portfolios A and…

Q: Use the information provided in the table below to answer the questions that follows. (1) Average…

A: Sharpe Ratio: It represents the risk-adjusted performance of an investment. It is computed by…

Q: What is the standard deviation of the following portfolio if the coefficient of the correlation…

A: Given Information:Variance A is 10% Weight of portfolio A is 0.30 Variance B is 20% Weight of…

Q: Suppose the market risk premium is 9 % and also that the standard deviation of returns on the market…

A: Expected rate of return is the minimum return that a shareholder requires on the investment made in…

Q: Calculate Stock B’s beta.     b. If Stock B’s beta were 0.80, what would be its new rate of return?

A: Information Provided: Risk free rate of return = 2% Market return = 7% Stock B's return = 11%

Q: The return, standard deviation, market risk premium and Beta (β) of A, B, C, D and the Market…

A: The  performance of the portfolios can be measured using Sharpe ratio, Treynor ratio and Jensen's…

Q: Assume that Treasury bills (T-bills) yield 6% and the market risk premium is 7%. (a) What strategy…

A:

Q: What is the correlation coefficient between returns on any efficient portfolio and returns on the…

A: Efficient portfolio is a type of portfolio which has eliminated all the non-systematic risk in the…

Q: We consider a market with N risky assets. The following table shows the information of some…

A: The portfolio variance is calculated as shown below. Portfolio…

Q: Suppose an investment is equally likely to have a 37.9% return or a -20% return. The total…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: The return of a portfolio is 11 per cent, its volatility is 15.2214 per cent, and its beta is 0.7.…

A: The Information ratio can be calculated by dividing the excess return of the portfolio by its…

Q: ider an asset with a beta of 1.2, a risk-free rate of 4.3%, and a market return of 12%. What is the…

A: Given, Beta = 1.2 Risk free rate = 4.3% Market return = 12%

Q: If E(rX)=0.12 and E(rY)=0.08, what would be the expected rate of return of a portfolio made of 30%…

A: Given the following information: Expected return from investment X = 0.12 Expected return from…

Q: A portfolio has an average return of 14.4 percent, a standard deviation of 18.5 percent, and a beta…

A: The Sharpe ratio: The Sharpe ratio is one of the most commonly used measures to assess the…

Q: A portfolio has a total return of 4.5%, a standard deviation of 40%, and a beta of 0.5. The market…

A: Market return, Rm = 13.5%Standard deviation of market return = 20% Market's treynor measure = 0.10…

Q: 4. Suppose portfolio P's expected return in 12%, its volatility (standard deviation) is 20%, and the…

A: Solution:- Sharpe Ratio measures the excess return over risk free return, per unit of risk taken ie.…

Q: Consider the following information: Portfolio Expected Return Standard Deviation Risk-free 7% 0%…

A: Sharpe ratio refers to the return provided by a portfolio after it has been adjusted for the…

Q: Use the following CAPM equation for a portfolio to answer the questions that follow: E(RP) = RF + βP…

A: Here, E(RP) is 4.2% RF is 1 % βP is 0.8 RM is 5% Actual Portfolio Return is 6%

Q: Which statement is correct? O The collection of all portfolios that minimize variance for varying…

A: Since you have posted multiple questions, we are solving the first question for you. Kindly repost…

Q: Bay Land, Inc. has the following distribution of returns:…

A: In the given case, we have provided the state of economy, probability and their respective…

Q: 3. The risk free rate is 2% and the expected return and standard deviation on the market is 12% and…

A: Risk free Return (Rf ) =  2% Return of Market (Rm) = 12% Standard Deviation of market = 20%

Q: Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and…

A: Expected Return on Portfolio: It is estimated by adding the individual security returns that are…

Q: A portfolio has an expected return of 16.78% and a variance of 1.03%. If the risk-free rate is…

A: The Sharpe ratio refers to the return of the portfolio that is adjusted for risk to determine the…

Q: imate that the correlation between Abercrombie and Fitch (ANF) stock returns with market portfolio…

A: Beta of stock shows the risk related to overall market that means how much will change in stock…

Q: Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Company A 30% 7% 18% -22% -14% 10% 26% -10%…

A: We have to design two portfolios and then find their average return, standard deviation of return…

Q: А. Compute the standard deviation of each stock. В. What is the covariance and correlation…

A: The mathematical measure of market uncertainty is the standard deviation. In stocks the standard…

Q: Consider a portfolio exhibiting an expected return of 6% in an economy where the riskless interest…

A: Given, Expected return = 6% Risk less interest rate = 1% Expected return on market portfolio = 10%…

Q: What is the alpha of a portfolio with a beta of 2, an actual return of 22%, market- return of 12%,…

A: The risk free rate, market return and beta of a portfolio is given. And, the required return is…

Q: Consider the following two portfolios. Portfolio A has an expected return of 9%, a standard…

A: The objective of the question is to find the beta of Portfolio B using the Capital Asset Pricing…

Q: The following expected return and the standard deviation of current returns are known: Security…

A: Portfolio standard deviation is the standard deviation of all the different investments in the…

Q: iven the information below, calculate the reward-to-risk ratio implied by the CAPM pricing model.

A: The risk-reward ratio determines how much reward is there for risk of  every dollar.

Q: If the market portfolio has a required return of 0.12 and a standard deviation of 0.40, and the…

A: SML is an abbreviation used for security market line. It represent the market equilibrium and its…

Q: The beta of the market portfolio is: 1.0 0.5 -1.0

A: In the given question we need to tell the beta of market porfolio.

Q: Table 1 shows the value of a portfolio consisting of security 1 and security 2. The respective…

A: Standard deviation is a statistical measurement of deviation from the expected data. It shows market…

Q: Suppose the market portfolio has an expected return of 9% and a volatility of 18.5%. YMH stock…

A: Sharpe ratio shows the risk adjusted performance of the stock based on risk free rate and volatility…

Q: You have two assets in your portfolio. Asset X has a beta of 1.7 and Asset Y has a beta of 0.50. The…

A: Assets: Assets are economic resources owned by an individual, corporation, or country. In finance,…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.