Penny inherited a $200,000 portfolio of investments from her grandparents when she turned 21. The portfolio is comprised of treasury bills and stock in Ford and Harley Davidson as follows. Based on the current portfolio composition and the expected returns, what is the expected rate of return for Penny's portfolio? a. 7.8% b. 8.7% c. 7.0% d. 8.0% Treasury Bills Ford Harley Davidson Expected Return 4.5% 8.0% 12.0% $ $ $ $ Value 80,000.00 60,000.00 60,000.00
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- Penny Francis inherited a $200,000 portfolio of investments from her grandparents when she turned 21 years of age. The portfolio is comprised of Treasury bills and stock in Ford (F) and Harley Davidson (HOG): Expected Return $ Value Treasury bills 4.5% 80,000 Ford (F) 8.0% 60,000 Harley Davidson (HOG) 12.0% 60,000 a. Based on the current portfolio composition and the expected rates of return, what is the expected rate of return for Penny's portfolio? b. If Penny wants to increase her expected portfolio rate of return, she can increase the allocated weight of the portfolio she has invested in stock (Ford and HarleyDavidson) and decrease her holdings of Treasury bills. If Penny moves all her money out of Treasury bills and splits it evenly between the two stocks, what will be her expected rate of return? c. If Penny does move money out of Treasury bills and into the two stocks, she will reap a…Rachel is a financial investor who actively Suys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 o. are A, $7,600 of Share B, $14,700 of Share C, and $5,500 of Share D. Required: a) Compute the weights of the assets in Racheľ's portfolio? * b) If Rachel's portfolio has provided her with returns of 9.7%, 12.4%, -5.. and 17.2% over the past four years, respectively. Calculate the geometric average return of the port. "n for this period. c) Assume that expected return of the stock A in Rachel's portfolio is 13.6% this ye. The risk premium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the in. "ion rate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Mode. (CAPMI. d) Following is forecast for economic situation and Rachel's portfolio returns next year, calculate the expected return, variance and standard deviation of the portfolio. ** State of economy Mild Recession Growth…(Related to Checkpoint 8.1) (Computing the portfolio expected rate of return) Penny Francis inherited a $200,000 portfolio of investments from her grandparents when she turmed 21 years of age. The portfolio is comprised of Treasury bills and stock in Ford (F) and Harley Davidson (HOG) a. Based on the current portfolo composition and the expected rates of return, what is the expected rate of retum for Penny's portfolio? b. If Penny wants to increase her expected portfolio rate of retur, she can increase the alocated weight of the portfolio she has invested in stock (Ford and Harley Davidson) and decrease her holdings of Treasury bills if Penny moves all her money out of Treasury bills and spits it evenly between the two stocks, what will be her expected rate of return? c. If Penny does move money out of Treasury bills and into the two stocks, she will reap a higher expected portfolio return, so why would anyone want to hold Treasury bills in their portfolio? a. Based on the current…
- Alecia is a financial investor who actively buys and sells in thesecurities market. Now she has a portfolio of all blue chips, including: $13 500of Share A, $7600 of Share B, $14 700 of Share C, and $5 500 of Share D.Required:a) Compute the weights of the assets in Rachel’s portfolio?b) Following is forecast for economic situation and Alecia’s portfolio returnsnext year, calculate the expected return, variance and standard deviationof the portfolio.State of economy Probability Rate of returnsMild Recession 0.35 - 5%Growth 0.45 15%Strong Growth 0.20 30%Rachel is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 of Share A, $7,600 of Share B, $14,700 of Share C, and $5,500 of Share D. Required: a) Compute the weights of the assets in Rachel's portfolio? (. - and 17.2% over the past four years, respectively. Calculate the geometric average return of the portfolio for this period. - c) Assume that expected return of the stock A in Rachel's portfolio is 13.6% this year. The risk premium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflation rate was 2.7%. Calculate the risk-free rate of retum using Capital Market Asset Pricing Model (CAPM). economic situation and Rachel's portfolio returns next year, calculate the expected return, variance and standard deviation of the portfolio.* b) If Rachel's portfolio has provided her with returns of 9.7%, 12.4%, -5.5% :1) Following is forecast for State of economy Probability…Neha is an analyst at a wealth management firm. One of her clients holds a $7,500 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. 35% 0.750 0.53% Arthur Inc. 20% 1.400 0.57% Li Corp. 15% 1.300 0.60% Transfer Fuels Co. 30% 0.300 0.64% Neha calculated the portfolio’s beta as 0.828 and the portfolio’s expected return as 8.55%. Neha thinks it will be a good idea to reallocate the funds in her client’s portfolio. She recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4.00%, and the market risk premium is 5.50%. 1. According to Neha’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? 0.86% 0.67% 1.07% 0.99%…
- Rachel is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 of Share A, S7,600 of Share B, $14,700 of Share C, and s5,500 of Share D. Required: 1. Compute the weights of the assets in Rachel's portfolio? 1. If Rachel's portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the past four years, respectively. Calculate the geometric average return of the portfolio for this period. 1. Assume that expected return of the stock A in Rachel's portfolio is 13.6% this year. The risk premium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflation rate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model (CAPM). 1. d) Following is forecast for economic situation and Rachel's portfolio returns next year, calculate the expected return, variance and standard deviation of the portfolio. State of economy Probability Rate…Rachel is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 of Share A, S7,600 of Share B, $14,700 of Share C, and $5,500 of Share D. Required: a) Compute the weights of the assets in Rachel's portfolio? . b) If Rachel's portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the past four years, respectively, calculate the geometric average return of the portfolio for this period. c) Assume that expected return of the stock A in Rachel's portfolio is 13.6% this year. The risk premium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflation rate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model (CAPM). d) Following is forecast for economic situation and Rachel's portfolio returns next year, calculate the expected return, variance and standard deviation of the portfolio.(Andrew is an analyst at a wealth management firm. One of his clients holds a $7,500 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. 35% 0.750 0.38% Arthur Inc. 20% 1.500 0.42% Li Corp. 15% 1.300 0.45% Baque Co. 30% 0.500 0.49% Andrew calculated the portfolio's beta as 0.908 and the portfolio's expected return as 10.90%. Andrew thinks it will be a good idea to reallocate the funds in his client's portfolio. He recommends replacing Atteric Inc.'s shares with the same amount in additional shares of Baque Co. The risk-free rate is 5.00%, and the market risk premium is 6.50%. According to Andrew's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? 0.66% 0.44% 0.71% 0.57% Analysts' estimates on expected returns from equity investments are based on…
- Brandon is an analyst at a wealth management firm. One of his clients holds a $5,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.750 38.00% Arthur Trust Inc. (AT) 20% 1.500 42.00% Li Corp. (LC) 15% 1.100 45.00% Baque Co. (BC) 30% 0.300 49.00% Brandon calculated the portfolio’s beta as 0.818 and the portfolio’s required return as 8.4990%. Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Baque Co. The risk-free rate is 4%, and the market risk premium is 5.50%. According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? (Note: Do not round your…Brandon is an analyst at a wealth management firm. One of his clients holds a $10,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.750 23.00% Arthur Trust Inc. (AT) 20% 1.500 27.00% Li Corp. (LC) 15% 1.100 30.00% Transfer Fuels Co. (TF) 30% 0.500 34.00% Brandon calculated the portfolio’s beta as 0.8775 and the portfolio’s expected return as 8.83%. Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4%, and the market risk premium is 5.50%. According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? (Note: Round your…Rachel is a financial investor who actively buys and sells in the securities market. Now she has aportfolio of all blue chips, including: $13,500 of Share A, $7,600 of Share B, $14,700 of Share C, and$5,500 of Share D. a) Following is forecast for economic situation and Rachel’s portfolio returns next year, calculate theexpected return, variance and standard deviation of the portfolio. State of economy Probability Rate of returnsMild Recession 0.35 - 5%Growth 0.45 15%Strong Growth 0.20 30%