Security A B C Beta 0.8 1.0 1.2 Expected Return 10% 12% 14% Residual standard deviation 25% 10% 20% If the standard deviation on the market is 20% calculate the variance of returns For C. A) 881 B) 400 C) 976 D) 576

Portfolio Expected return Standard deviation Q 7.8% 10.5% R 10.0% 14.0% S 4.6% 5.0% T 11.7% 18.5% U 6.2% 7.5%   Q) If you are only willing to make an investment with a standard deviation of 7.0%, is it possible for you to earn a return of 7.0%?

Sample Problem: Investment Market Rate 12% 10% ? 15% A B с D Beta 1.5 (.5) 1.0 ? CAPM ? ? 10% 12% If risk free rate is at 2%, supply the missing values of the summarized table for the portfolio of investment.

use attachment to answer questions This question relates to Diagram 1 from the  9.4 diagrams, which shows the Security Market Line. What is the expected return on the market?   Select one: a. 20% b. 10% c. 15% d. 5%

E (R) 15.5% 5% 1.5 SML B (a) What is the Expected Return for a security with a Beta of 1.2?

% Return on T-Bills, Stocks and Market Index   States of Economy Probability T-Bills Phillips Pay-up Rubber-Made Market Index Recession 0.2 7 -22 28 10 -13 Below Average 0.1 7 -2 14.7 -10 1 Average 0.3 7 20 0 7 15 Above Average 0.3 7 35 -10 45 29 Boom 0.1 7 50 -20 30 43 Mean   7 16.9 20.7 19.6 15 Variance (%) ^2   0 549.09 244.124 358.04 313.6 Standard Deviation   0 23.4326695 15.6244712 18.92194493 17.7087549 Coefficient of Variation   0 1.386548491 7.54805372 0.965405354 1.18058366 Covariance wit MP   0 .0413 -.0275 .0231 .0314 Correlation with Market Index   0 0.9953 -0.9953 0.6894 1.0000 Beta   0 1.32 - 0.88 0.74 1.00 CAPM Req. Return   7.00 % 17.54 % -0.02% 12.89% 15.00% Valuation                ( Overvalued / Undervalued/Fairly Valued)   Valued Fairly…

Problem 5 Assume that you manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 28%. The T-bill rate (risk-free rate) is 7%. Your client chooses to invest 70% in the risky portfolio in your fund and 30% in a T-bill money market fund. We assume that investors use mean-variance utility: U = E(r) – 0.5 x Aa?, where E(r) is the expected return, A is the risk aversion coefficient and o? is the variance of returns. a) What is the expected value and standard deviation of the rate of return on your client's portfolio? b) What is the reward-to-volatility ratio (Sharpe ratio) of your risky portfolio? What is the reward-to-volatility ratio (Sharpe ratio) of your client's risky portfolio? Comment on the relationship between these two Sharpe ratio calculated and explain the intuition behind. c) Draw the Capital Allocation Line (CAL) of your portfolio on an expected return- standard deviation diagram. What is the slope of the CAL? Show the position of your…

Consider the following portfolio of assets: Loan Weight 1 0.30 2 0.70 Expected returni ம σ2 13% 11% 9.06% 82.0% P12=-0.87 8.72% 76.0% 012-75.0% What is the variance of the portfolio (round to two decimals)? Note: a^2 denotes the square of a. For example, 2^2 = 4, 3^2=9 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + (0.3) (0.7)(-0.87) (9.06%) (8.72%) = 30.19 (0.3)^2 (82.0%) + (0.7)^2*(76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 15.75 (0.3)^2*(82.0%) + (0.7)^2*(76.0%) + [(0.3) (0.7)]^2 (-0.87) (9.06%) (8.72%) = 41.59 (0.3) (82.0%) + (0.7) (76.0%) + 2(0.3) (0.7)(-0.87) (9.06 %) (8.72%) = 48.93

Calculate the beta of security E with the S&P. B, % -3.76 21.67 19.84 13.37 4.98 11.35 Year 1 2 3 4 5 6 O 1.20 O 0.40 O 0.36 O 0.24 A, % 10.67 12.54 -8.82 5.56 27.34 21.94 C, % 12.98 45.23 16.52 14.28 -15.53 1.28 D, % 25.51 18.97 -11.57 21.42 26.22 17.23 E, % 8.96 29.67 -12.07 25.68 31.08 -12.87 S&P, % 0.34 15.94 4.66 -4.45 15.14 -2.89

Portfolio Expected return Standard deviation Q 7.8% 10.5% R 10.0% 14.0% S 4.6% 5.0% T 11.7% 18.5% U 6.2% 7.5% What is the minimum level of risk that would be necessary for an investment to earn 7.0%? What is the composition of the portfolio along the Capital Market Line (CML) that will generate that expected return? Rf= 3%