and bonds and Portfolio B which consists purely of cryptoc following information on the portfolios: State of market Probability Bear Bull Normal 55% 25% 20% Portfolio Portfolio A B 11% 10% 45% 35% 30% 15%
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a) Calculate the expected returns for both portfolios
b) Calculate the standard deviation for portfolio A.
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Suppose Taneal is considering combining the two portfolios into a single portfolio. If she invests 60% in Portfolio A and 40% in Portfolio B:
i. Determine the return of the new portfolio
ii. If the standard deviation for portfolio B was 19%, comment on the risk of the new portfolio, supported with calculations.
iii. Should Taneal combine these two portfolios? Why?
- Anna holds a portfolio comprising the following 3 stocks: X, Y and Z. Investment Amount Beta. Expected return Security X $2000. 1.3. Security Y $1000. 1. 10% Security Z. $500. 0. 2% a. Determine the expected return of security X. b. Calculate the return of Anna’s portfolio. c. Calculate the beta of Anna’s portfolio. d. To reduce the systematic risk of the portfolio, Anna is considering 3 securities to add to the portfolio. Security A has a beta of 0, security B has a beta of 0.5 and Security C has a beta of -0.3. Discuss which security will be most effective in reducing the portfolio’s systematic risk? How would portfolio expected return change (higher or lower) if you add this security?Jack Ma is attempting to evaluate two possible portfolios – both consisting of the same five assets but held in different proportions. He is particularly interested in using beta to compare the risk of the portfolios and in this regard has gathered the following data. assets assets beta Portfolio A Portfolio B 1 1.30 10% 30% 2 0.70 30% 10% 3 1.25 10% 20% 4 1.10 10% 20% 5 0.90 40% 20% a) Calculate the betas for portfolio A and B. b) Compare the risk of each portfolio to the market as well as to each other C) Which portfolio is more risky and why?Anna holds a portfolio comprising the following 3 stocks: X, Y and Z. Investment Amount $'000 Beta Expected Return Security X 2,000 1.3 Security Y 1,000 1.0 10% Security Z 500 0 2% (a) Determine the expected return of security X. (b) Calculate the return of Anna's portfolio. (c) Calculate the beta of Anna's portfolio.
- Suppose you visit with a financial adviser, and you are considering investing some of your wealth in one of three investment portfolios: stocks, bonds, or commodities. Your financial adviser provides you with the following table, which gives the probabilities of possible returns from each investment: Stocks Bonds Commodities Probability Return Probability Return Probability Return 20% 15% 0.15 20% 0.6 10% 0.2 0.2 12.5% 0.4 7.5% 0.2 0.25 0.2 0.4 3.8% 0.2 0.2 0% To maximize your expected return, you should choose O A. commodities. B. bonds. OC. stocks. OD. All of the portfolios have the same expected returnRose Berry is attempting to evaluate two possible portfolios, which consist of the same five assets held in different proportions. She is particularly interested in using beta to compare the risks of the portfolios, so she has gathered the data shown in the following table: Portfolio weights Asset Asset beta Portfolio A Portfolio B 1 1.43 15% 20% 2 0.69 40% 5% 3 1.15 10% 35% 4 1.42 5% 20% 5 0.97 30% 20% Totals 100% 100% a. Calculate the betas for portfolios A and B. b. Compare the risks of these portfolios to the market as well as to each other. Which portfolio is more risky?The following data are available to you as portfolio manager: Security Estimated return (%) Beta A 40 3.0 B 35 2.5 C 30 1.0 D 17.5 1.8 E 20.0 1.5 Market Index 25 2.0 Government Security 17 0 In terms of the security market line, which of the securities listed above are underpriced? Assuming that a portfolio is constructed using equal proportions of the five securities listed above, calculate the expected return and risk of such a portfolio
- Consider a portfolio consisting of the below securities with the below characteristics: Security Amount Invested($) Beta Expected Return A 1,5 MIL 1.0 12.0%B 1.0 MIL 1.5 13.5%C 2.0 MIL 0.8 9.0% Required:a) Calculate the portfolio’s Beta. b) Calculate the portfolio’s expected return. c) Discuss the Capital Asset Pricing Model (CAPM) explaining what it is used forand which are its limitations.You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible investments is given below: Asset Investment Beta Stock A $ 147,000 .92 Stock B $ 133,000 1.37 Stock C 1.52 Risk - free asset How much will you invest in Stock C? How much will you invest in the risk - free asset? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.Yessy Enterprise Ltd has prepared the following information regarding two investments under consideration. Based on the risk/return profile, which investment should be accepted? Investment A Investment B Probability Return Probability Return 0.15 8% 0.20 1% 0.35 11% 0.30 8% 0.35 19% 0.30 15% 0.15 -2% 0.20 9% Will you change your recommendation (above) if Yessy Enterprise currently holds a portfolio with only five stocks? Why?
- Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns? 4.Calculate the Standard deviation of the portfolio.Your client, Sandra is considering three assets: a bond mutual fund, a cryptocurrency ETF, and US Treasury bills. The annualized T-bill rate is 2%. The information below refers to the two risky assets. Expected return Standard deviation Bond mutual fund Cryptocurrency ETF 3% 10% Correlation coefficient 0 14% 20% (a) What are the proportions of each asset, in Sandra's optimal risky portfolio? (b) Suppose the return for each risky asset follows a normal distribution. What is the 1% value-at-risk for Sandra's optimal risky portfolio? Hint: P(Z<-2.326) = 0.01 where Z~N(0, 1).You want to create a portfolio equally as risky as the market, and you have $5M to invest. Given the information below, what is your investment in the risk-free asset? Asset Stock A Stock B Stock C Risk-free Asset $0.8M $0.7M $0.9M $1.1M Investment $1M $2M Beta 0.7 1.25 1.5