Expected Return SD (s) Correlation Coefficient Bond Fund 10% 10% -0.2 Stock Fund 16% 30% If the risk-free rate of return is 8%, what is the proportion of the optimal (tangent) risky portfolio, invested in Stock Fund?
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| Expected Return | SD (s) | Correlation Coefficient | |||||
| Bond Fund | 10% | 10% | -0.2 | ||||
| Stock Fund | 16% | 30% | |||||
| If the risk-free |
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- USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM Investment Beta Analyst's Estimated Return Stock X 2.3 15.5% Stock Y 1.2 13.6% Market Portfolio 1.0 11.5% Risk-free rate 4.0% What is the required rate of return for Stock X based on the capital asset pricing model (CAPM)?Expected Return SD (s) Correlation Coefficient Bond Fund 10% 10% -0.2 Stock Fund 16% 30% What is the proportion of the (global) minimum variance portfolio invested in Stock Fund?Capital Asset Pricing Model The market portfolio has an excess return of 8% and volatility of 15%. The risk free rate is 5%. What is the minimum required return for a stock that has a volatility of 27% and a market correlation of 0.39. (Your answer will be a percentage. Enter your answer as a whole number with two decimals. E.g. if your answer is 12.345%, enter 12.34.)
- Suppose that• Return Ri:35% RM:28%• Volatility σi: 42% σM: 30%• Find a portfolio combination with the same level of risk than thebenchmark (market)Consider the following simplified APT model: Factor Expected Risk Premium Market 6.4% Interest Rate -0.6% Yield Spread 5.1% Factor Risk Exposures Market Interest Rate Yield Spread Stock Stock (b1) (b2) (b3) P 1.0 -2.0 -0.2 P2 1.2 0 0.3 P3 0.3 0.5 1.0 a) Calculate the expected return for the above stocks. Assume risk free rate is 5%. Consider a portfolio with equal…Expected Return on the market HPR Beta Risk-free rate Stock ABC 15.68% 1.2 1% 6.68% What is the alpha for stock ABC? Answer as a percent. Show work.
- Assume the risk-free rate is r = 3%. Consider the data in the table below: Stock Expected Return Volatility Stock 1 15% 40% Stock 2 7% 30% acompute (c) Determine the tangent portfolios & their respective mean returns and volatilitiesConsider the following simplified APT model: Factor Expected Risk Premium Market 6.4% Interest Rate -0.6% Yield Spread 5.1% Factor Risk Exposures Market Interest Rate Yield Spread Stock Stock(b1) (b2) (b3) P 1.0 -2.0 -0.2 P2 1.2 0 0.3 P3 0.3 0.5 1.0 Required: 1. Calculate the expected return for the above stocks. Assume risk free rate is 5%. Consider a portfolio with equal investments in stocks P, P2 and P3 2.What are the factor risk exposures for the portfolio? 3.What is the portfolio’s expected return?Suppose we have the following information: Securit Amount Invested Expected Return Beta Stock A RM1 ,OOO 8% 0.80 Stock B RM2,OOO 12% 0.95 Stock C RM3,OOO 15% 1.10 Stock D RM4,OOO 18% a) Compute the expected return on this portfolio. b) Calculate the beta of the portfolio. c) Does this portfolio have more or less systematic risk than an average asset? Explain.
- For an investment in a stock, the probability of the return being -10.0% is 0.3, 10.0% is 0.4, and 30.0% is 0.3. Given the probability distributions, what is the expected rate of return for the investment?Choices:A. 10.00%B. 9.50%C. 15.00%D. 12.50%E. 13.00%Assume that the risk-free rate of return is 4% and the market risk premium (i.e., Rm - Rf) is 8%. If use the Capital Asset Pricing Model (CAPM) to estimate the expected rate of return on a stock with a beta of 1.28, then this stock's expected return should be -- A) 10.53% B) 14.24% 23.15% 6.59%Consider following information on a risky portfolio, risk-free asset and the market index. What is the Sharpe ratio of the market index? Risky portfolio Risk-free asset Market index Average return 8.2% 2% 6% Std. Dev. 26% 20% Residual std. dev. 10% Alpha 1.4% Beta 1.2