Q5. You are considering two assets with the following characteristics. Return Standard deviation 0.10 Weights Asset 1 Asset 2 0.15 0.20 0.5 0.5 0.20 Compute the standard deviation of two portfolios if r1,2 = 0.40 and -0.60, respectively.

Q: a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a…

A: Information Provided: Stock beta = 1.35 Expected return = 16% Risk-free asset return = 4.8%…

Q: Two investments, X and Y, have the characteristics shown below. E(X) = $70, E(Y)%3D$120, o =7,000, o…

A: Expected Return on Portfolio = (Weight of security X * Return on security X ) + (Weight of security…

Q: A two-asset portfolio has the following characteristics. The correlation coefficient between the…

A: The expected return of the portfolio is the weighted average of individual securities' returns. The…

Q: A portfolio consists of 70% of investment A and 30% of investment B. The expected return on…

A: The Expected portfolio or overall rate of return of the portfolio is the total return that is…

Q: The following table provides information relating to Omega Ltd, as well as the market portfolio. The…

A: Here, To Find: Part A. Omega's M2 value =? Part B. Omega's Sharpe Ratio =?

Q: b. Suppose that you have the following information of three risky assets. Security Return (%)…

A: Risk free asset = 6% A= 6

Q: You are evaluating various investment opportunities currently available and you have calculated…

A: Since you have asked a question with multiple subparts, we will solve the first three sub-parts for…

Q: The information about asset X and Y are given as follows: Expected Standard Asset Return Deviation…

A: Here, Expected Return of X is 10% Standard Deviation X IS is 4% Expected Return of Y is 15% Standard…

Q: a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not…

A: Portfolio Expected Return: It represents the sum of expected return on individual security/assets…

Q: Portfolio contains of two assets. Asset A has an expected return of 2% and asset B has an expected…

A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…

Q: Which of the following statements is correct?   Select one: a.   Assuming a correlation…

A: The combination of stock will reduce the overall risk of the portfolio but it it depends on the…

Q: Stock A has a standard deviation of 3.5% while stock B has a standard deviation of 4.6%. If both…

A: Standard deviation is a variation in the mean value of given data. Standard deviation is a…

Q: Consider two assets (1 & 2) with the following information: E (R1) = 10 %, σ1 = 10 %, E (R2) = 12 %,…

A: 1. Portfolio's expected return: Portfolio's expected return can be calculated with the following…

Q: You have invested $1,000 in a risky asset with an expected rate of return of 0.17 and a standard…

A: Capital asset line (CAL) is a graphical representation of the measure of risk that an investor's…

Q: Asset 1 Asset 2 Expected return 0.07 0.078 Standard deviation 0.1 0.2 if correlation is 0.4 weight 1…

A: In order to determine the risk and performance of the portfolio investors uses measures such as…

Q: Two assets A and B have the following risk and return characteristics   RA =22% ; RB = 20% ;  =…

A: The required variables are as below: RA=Risk or Standard Deviation for Asset A=22%=0.22RB=Risk or…

Q: invest 40% in A and 60% in B, what would be the return standard deviation of your portfolio? Enter…

A: First we need to find the standard deviation of individual stocks and their correlation co-efficient…

Q: Two assets, Q & R, each have a standard deviation of 10%. Asset Q's expected return is 8.5% and…

A: The rate of return that an investor is expected to earn from the investment is term as the expected…

Q: Based on the following table, which option gives you highest risk-adjusted returns? Note you don't…

A: a) Sharpe Ratio: Sharpe Ratio is used to measure return earned in excess of the risk-free return per…

Q: Recall the definition of the correlation coefficient of two random variables, defined as AB PAB The…

A: Portfolio is a bundle of different investments. To reduce or decrease the risk, investors invest the…

Q: dard deviation of the portfolio return is:

A: Portfolio Standard Deviation is the standard deviation of an investment portfolio's rate of return,…

Q: The following data are available for two assets A and B: E(rA) = 13% E(rB) = 15%…

A: E(rA) =    13% E(rB) = 15% s(rA) = 22% s(rB) = 24% rA,B = 0

Q: Using the SML [LO4] Asset W has an expected return of 11.8 percent and a beta of 1.15. If the…

A:

Q: Consider the two risky investments below: Scenario Asset 1 Asset 2 Probability | Returns 0.1…

A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…

Q: Asset 1 has a standard deviation of returns of 0.15 while Asset 2 has a standard deviation of…

A: The covariance of return is product of coefficient of correlation and standard deviations of two…

Q: Consider two assets A and B with expected return as 9% and 5%, respectively. Standard deviation of…

A: The expected return of Portfolio is calculated with the help of following formula  Er(p) = Er (A) ×…

Q: Example 9: What is the portfolio standard deviation for a two-asset portfolio comprised of the…

A: Weight in asset A (Wa) = 40000 / (40000 + 60000) = 0.4 Weight in asset B (Wb) = 1 - 0.4 = 0.6…

Q: Consider two risky assets that have returns variances of 0.0625 and 0.0324, respectively. The…

A: The provided information are: Return variancesσ12  and σ22 are 0.0625 and 0.0324. Two are equal…

Q: Which one of the following statements is NOT correct?

A: Portfolio is the combination of stock, bonds, etc.

Q: sider two assets with the following characteristics: Expected return of asset 1 = 0.15,…

A: Expected return of portfolio depends on the weight of assets in the portfolio

Q: e. Calculate the Portfolio Return when you know that its composition is as follows: Asset A: Weight…

A: Portfolio Return: The gain or loss generated by an investment portfolio encompassing a variety of…

Q: b. Suppose that you have the following information of three risky assets. Security Return (%)…

A: Here, Risk Free Asset is 6% Other Details are as follows: A= 6

Q: Assume a Portfolio of two assets A and B whose standard deviations of their returns are 8.6% and…

A: The question is related to the portfolio Management. In this question we will first calculate…

Q: You have invested $1,000 in a risky asset with an expected rate of return of 0.17 and a standard…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Suppose there are an infinite number of assets with an expected return of 12% p.a. and a standard…

A: Formula for Expected Return and Standard deviation of 2 asset and 3 asset portfolio w1,w2,w3 =…

Q: 3. Consider a risky asset, A, and a risk-free asset, F. The average rate of return and the standard…

A: Combining a risk free asset with a risky asset to create a portfolio significantly improve the risk…

Q: We have three assets A1, A2, A3 and the following information: E(r1)=15%, σ1=12%,; E(r2)=19% and…

A: The diversification of assets: A portfolio comprises various assets in order to reap the benefits of…

Q: A person is interested in constructing a portfolio. Two stocks are being considered. Letx = percent…

A: The Total dispersion in the value of returns over a certain period of time is known as the Standard…

Q: A fund manager can invest in any combination of the three assets with the following expected returns…

A: Here, Expected Return and Standard Deviation of Asset-1 is 2% Expected Return and Standard Deviation…

Q: Compute: a) The expected rate of return. b) The standard deviation of the expected return. c) The…

A: Expected Return The minimum risk expected by an investor for the risk undertaken in the process of…

Q: a. Use the following information: E[rXOM] = 15.6%, standard deviationXOM = 15.9% E[rMS]=29.7%,…

A: “Since you have posted a many questions, we will solve first question for you. To get the remaining…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.