Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 11 % and 14 %, respectively. The beta of A is 0.8 % while that of B is 1.5. The T-bill is currently 6 %, while the expected rate of return of the S&P 500 index is 12 %. The standard deviation of portfolio A is 10 % annually, while that of B is 31 % , and that of the index is 20 %: If you currently hold a market index portfolio, would you choose to add either of these portfolios to your holdings? Explain. If instead you could invest only in bills and one of these portfolios, which would you choose, and why? Investor Y, who put K1 in large stocks (the S & P 500 portfolio) on December 31, 1925, and re-invested all dividends in that portfolio, would have ended on December 31, 2003, with K1992.80.
Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 11 % and 14 %, respectively. The beta of A is 0.8 % while that of B is 1.5. The T-bill is currently 6 %, while the expected rate of return of the S&P 500 index is 12 %. The standard deviation of portfolio A is 10 % annually, while that of B is 31 % , and that of the index is 20 %: If you currently hold a market index portfolio, would you choose to add either of these portfolios to your holdings? Explain. If instead you could invest only in bills and one of these portfolios, which would you choose, and why? Investor Y, who put K1 in large stocks (the S & P 500 portfolio) on December 31, 1925, and re-invested all dividends in that portfolio, would have ended on December 31, 2003, with K1992.80.
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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Based on current dividend yields and expected
- If you currently hold a market index portfolio, would you choose to add either of these portfolios to your holdings? Explain.
- If instead you could invest only in bills and one of these portfolios, which would you choose, and why? Investor Y, who put K1 in large stocks (the S & P 500 portfolio) on December 31, 1925, and re-invested all dividends in that portfolio, would have ended on December 31, 2003, with K1992.80.
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