Assume the CAPM holds. You are holding a portfolio with the beta of 0.9 and the standard deviation of 40%. The expected return on the market portfolio is 10% and the standard deviation of returns on the market portfolio is 16%. The risk-free rate is 3.5%. How much more expected return without increase in the risk of your portfolio can you earn if you make your portfolio efficient? Options: 8.60% more than I earn now 11.35% more than I earn now My portfolio is already efficient, I cannot earn more without increasing the risk of my portfolio 10.40% more than I earn now 13.15% more than I earn now

Assume the CAPM holds. You are holding a portfolio with the beta of 0.9 and the standard deviation of 40%. The expected return on the market portfolio is 10% and the standard deviation of returns on the market portfolio is 16%. The risk-free rate is 3.5%. How much more expected return without increase in the risk of your portfolio can you earn if you make your portfolio efficient? Options: 8.60% more than I earn now 11.35% more than I earn now My portfolio is already efficient, I cannot earn more without increasing the risk of my portfolio 10.40% more than I earn now 13.15% more than I earn now

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The risk free rate is 3%. The optimal risky portfolio has an expected return of 9% and standarddeviation of 20%. Answer the following questions.a) Assume the utility function of an investor is U = E(r) − 0.5Aσ2. What is condition ofA to make the investors prefer the optimal risky portfolio than the risk free asset? b) Assume the utility function of an investor is U = E(r) − 2.5σ2. What is the expectedreturn and standard deviation of the investor’s optimal complete portfolio?
The risk-free rate is 2%, the market risk premium is 8.00%, and portfolio A has a beta of 2. What is the required rate of return on this portfolio?
Suppose the assumption behind that the CAPM hold. The risk free rate is 2% and the expected return market is 9% .The standard deviation of the market portfolio is 15% .AAPL has a beta of 1.4 and standard deviation of 35% .Suppose that the standard deviation of your optimal portfolio is 18% . What is its expected return?
If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%. A) Portfolio A Market B) A Market Portfolio Expected Return A Market Expected Return D) 15% 15% Portfolio Expected Return Portfolio 20% 15% 20% 15% Expected Return A 30% Market 15% All options are possible. Option A Option D Option B Option C 1.2 1.0 Beta 1.2 1.0 Beta 12% 20 Beta 2.5 1.0 Beta
Asset B has a beta of 1.2 and an expected return of 16%. The risk-free rate is 4%. If you wish to hold a portfolio with a beta equal to 1.0, what is the expected return of the portfolio? 13.0% 10.0 % 15.0 % 12.0% 14.0%
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Assume that there is a portfolio with an E(r) =20% and σ = 30%. Also, the risk-free rate of return on T-Bills is 7%. If you are a risk-averse investor with degree of risk aversion A=4 would you invest in the risky portfolio or in the risk free asset? And what if your A=2? Assume that there is a portfolio with an E(r) =20% and σ = 30%. Also, the risk-free rate of return on T-Bills is 7%. If you are a risk-averse investor with degree of risk aversion A=4 would you invest in the risky portfolio or in the risk free asset? And what if your A=2?
The risk premium of the market portfolio is 9 %, the risk free rate is 5 % and the beta estimate for AELZ is β = 1.3. What is the risk premium? What is the expected rate of return?
Suppose that you currently have $100,000 invested in a portfolio with an expected return of 13% and a volatility of 8%. The efficient (tangent) portfolio has an expected return of 17% and a volatility of 10%. The risk-free rate of interest is 1%. Suppose that you want to keep the expected return equal to the current rate of 13%. Accordingly, the level of risk you can expect is: 1.00% 3.75% 4.75% 5.15% None of the above
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Consider the following information: Expected Return Portfolio Risk-free Market A Expected return 10% 15.0 11.2 Alpha Required: a. Calculate the expected return of portfolio A with a beta of 0.6. (Round your answer to 2 decimal places.) Beta 0 1.0 0.6 % b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) % Che

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