Consider the following information: State of Probability of Rate of Return if State Occurs Economy State of Economy Stock A Stock B Stock C Boom .19 .366 .466 .346 Good .41 .136 .116 .186 Poor Bust .31 .09 .026 -.126 036 -.266 -.091 -.106 a. Your portfolio is invested 31 percent each in A and C and 38 percent in B. What is the expected return of the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of this portfolio? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. c. What is the standard deviation of this portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Expected return b. Variance c. Standard deviation % I1%

State ofEconomy Probabilityof State Return on AssetDin State Return on AssetEin State Return on AssetFin State Boom 0.35 0.060 0.310 0.25 Normal 0.50 0.060 0.180 0.20 Recession 0.15 0.060 -0.210 0.10 An investor builds up his portfolio with 40% in Asset D, and the rest isAsset F. What is his expected portfolio returns?

Nikul

The following portfolios are being considered for investment. During the period under consideration, RFR =0.07               Porfolio Return Beta                 P 0.15 1.00 0.05       Q 0.20 1.50 0.1       R 0.10 0.60 0.03       S 0.17 1.10 0.06       Market 0.13 1.00 0.04       Compute the Sharpe measure for each portfolio and the market portfolio Compute the Treynor measure for each portfolio and the market portfolio Rank the portfolios using each measure explaining the cause for any differences you find in the rankings.

Consider the following performance data for a portfolio manager:               Benchmark Portfolio Index Portfolio     Weight Weight Return Return   Stocks 0.65 0.7 0.11 0.12   Bonds 0.3 0.25 0.07 0.08   Cash 0.05 0.05 0.03 0.025   a.Calculate the percentage return that can be attributed to the asset allocation decision. b.Calculate the percentage return that can be attributed to the security selection decision.

Portfolio Management A particular firm’s portfolio is composed of two assets, which we will call" A" and "B." Let X denote the annual rate of return from asset A, and let Y denote the annual rate of return from asset B. Suppose that E(X) = 0.15, E(Y) = 0.20, SD (X) = 0.05, SD (Y) = 0.06, and CORR (X, Y) = 0.30.  (a) What is the expected return of investing 50% of the portfolio in asset A and 50% of the portfolio in asset B? What is the variance of this return?  (b) Replace CORR (X, Y) = 0.30 by CORR (X, Y) = 0.60, 0, -0.30, and -0.60 and answer the questions in part (a). What is the impact of correlation on the expected returns and its variance? Explain why this is so.  (c) Suppose that the fraction of the portfolio that is invested in asset B is f, and so the fraction of the portfolio that is invested in asset A is (1 – f). Let f vary from f = 0.0 to f = 1.0 in increments of 5% (that is, f = 0.0, 0.05, 0.10, 0.15, ...), and compute the mean and the variance of the annual rate of…

Consider the following information for four portfolios, the market, and the risk-free rate (RFR): Portfolio Return Beta SD A1 0.15 1.25 0.182 A2   0.1  0.9 0.223 A3 0.12  1.1 0.138 A4 0.08  0.8 0.125 Market 0.11     1    0.2 RFR 0.03     0       0 Refer to Exhibit 18.6. Calculate the Jensen alpha Measure for each portfolio.   a. A1 = 0.014, A2 = -0.002, A3 = 0.002, A4 = -0.02     b. A1 = 0.002, A2 = -0.02, A3 = 0.002, A4 = -0.014     c. A1 = 0.02, A2 = -0.002, A3 = 0.002, A4 = -0.014     d. A1 = 0.03, A2 = -0.002, A3 = 0.02, A4 = -0.14     e. A1 = 0.02, A2 = -0.002, A3 = 0.02, A4 = -0.14

Portfolio theory with two assets E(R1)=0.15 E(01)= 0.10 W1=0.5 E(R2)=0.20 E(02) = 0.20 W2=0.5 Calculate the expected return and the standard deviation of the two portfolios if r1,2 = 0.4 and -0.60 respectively.

Consider a single-index model economy. The index portfolio M has E(RM ) = 6%, σM = 18%.An individual asset i has an estimate of βi = 1.1 and σ2ei = 0.0225 using the single index modelRi = αi + βiRM + ei. The forecast of asset i’s return is E(ri) = 12%. rf = 4%. a) According to asset i’s return forecast, calculate αi.  (b) Calculate the optimal weight of combining asset i and the index portfolio M .  (c) Calculate the Sharpe ratio of the index portfolio M and the portfolio optimally combiningasset i and the index portfolio M .

Consider the following information: Rate of Return if State Occurs State of Probability of State of Economy Stock A Stock B Stock C Economy Boom 0.15 0.32 0.42 0.33 Good 0.45 0.19 0.13 0.12 Poor 0.30 -0.05 -0.08 -0.06 Bust 0.10 - 0.16 -0.28 0.09 a. Your portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the expected return of the portfolio? (Round your answer to 2 decimal places. (e.g., 32.16)) Expected return % b-1What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places. (e.g., 32.16161)) Variance b-2What is the standard deviation? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Standard deviation %