Suppose Neha is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds. Combination A B C D E There is a Fraction of Portfolio in Diversified Stocks (Percent) 0 25 50 75 100 Average Annual Return (Percent) 2.50 4.50 6.50 8.50 Accept lower average annual rate of return relationship between the risk of Neha's portfolio and its average annual return. 10.50 Suppose Neha currently allocates 75% of her portfolio to a diversified group of stocks and 25% of her portfolio to risk-free bonds; that is, she chooses combination D. She wants to reduce the level of risk associated with her portfolio from a standard deviation of 15 to a standard deviation of 5. In order to do so, she must do which of the following? Check all that apply. Sell some of her bonds and use the proceeds to purchase stocks Sell some of her stocks and use the proceeds to purchase bonds Place the entirety of her portfolio in bonds Standard Deviation of Portfolio Return (Risk) (Percent) 0 5 10 15. 20

Consider the information on the market, the risk-free asset, and a mutual fund. You want to build a two-asset portfolio comprising the market portfolio and the risk-free asset such that your portfolio beta is the same as the mutual fund. What is the portfolio weight on the market in your portfolio? Mutual Fund Market Risk Free E(k) 11.1% 8.5% 2.0% Beta 1.4 1 0

Suppose Rosa is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds. Combination A B C D E Fraction of Portfolio in Diversified Stocks (Percent) 0 25 50 75 100 Average Annual Return (Percent) 2.00 4.50 7.00 9.50 12.00 If Rosa reduces her portfolio's exposure to risk by opting for a smaller share of stocks, she must also accept a Sell some of her bonds and use the proceeds to purchase stocks Accept more risk Standard Deviation of Portfolio Return (Risk) (Percent) 0 5 10 15 20 Suppose Rosa currently allocates 25% of her portfolio to a diversified group of stocks and 75% of her portfolio to risk-free bonds; that is, she chooses combination B. She wants to increase the average annual return on her portfolio from 4.5% to 9.5%. In order to do she must do which of the following? Check all that apply. Sell…

An investor aims to build a portfolio with annual return equal to 8.88%. In the market only two stocks (A and B) are available, with annual historical returns equal to 9.6% and 7.8% respectively. Assume future returns have the same distribution of past returns. What is the percentage of funds that the investor must allocate to the stock A and B?

Give typing answer with explanation and conclusion

Baghiben

As the chief investment officer for a money management firm specializing in taxable individual investors, you are trying to establish a strategic asset allocation for two different clients. You have established that Ms. A has a risk-tolerance factor of 8, while Mr. B has a risk-tolerance factor of 27. The characteristics for four model portfolios follow:   ASSET MIX Portfolio Stock Bond ER σ2 1 6 % 94 % 9 % 6 % 2 25   75   10   10   3 67   33   11   14   4 88   12   12   24     Calculate the expected utility of each prospective portfolio for each of the two clients. Do not round intermediate calculations. Round your answers to two decimal places.   Portfolio Ms. A Mr. B 1       2       3       4         Which portfolio represents the optimal strategic allocation for Ms. A? Which portfolio is optimal for Mr. B? Portfolio  represents the optimal strategic allocation for Ms. A. Portfolio  is the optimal allocation for Mr. B. For Ms. A, what level of…