The UIB company desires to construct a portfolio with 15% expectedreturn. The portfolio is to consist of some combination of security X andsecurity Y, which have the following expected returns, standarddeviations of returns, and betas:SecuritySecurityYMarketRisk freeXportfolioreturnExpected8%19%13%2%returnStandard6%15%4%deviationBeta0.941.501. Determine the beta of the portfolio.2. Should UIB invest in the portfolio. Justify.3. Compute the correlation between security Y and the market portfolio

Beta of portfolio indicates the systematic risk of the portfolio. Systematic risk is also known as…

Answered: The UIB company desires to construct a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider the following information for four portfolios, the market, and the risk-free rate (RFR): Portfolio Return Beta SD A1 0.15 1.25 0.182 A2 0.1 0.9 0.223 A3 0.12 1.1 0.138 A4 0.08 0.8 0.125 Market 0.11 1 0.2 RFR 0.03 0 0 Refer to Exhibit 18.6. Calculate the Jensen alpha Measure for each portfolio. a. A1 = 0.014, A2 = -0.002, A3 = 0.002, A4 = -0.02 b. A1 = 0.002, A2 = -0.02, A3 = 0.002, A4 = -0.014 c. A1 = 0.02, A2 = -0.002, A3 = 0.002, A4 = -0.014 d. A1 = 0.03, A2 = -0.002, A3 = 0.02, A4 = -0.14 e. A1 = 0.02, A2 = -0.002, A3 = 0.02, A4 = -0.14
Write the equation of the Security Market Line (SML). Compute and draw theSML when the expected return of the NASDAQ index (market portfolio) is17% and the return to the risk-free asset is 7%
The UIB company desires to construct a portfolio with 15% expected return. The portfolio is to consist of some combination of security X and security Y, which have the following expected returns, standard deviations of returns, and betas: Security X 8% 6% 0.94 Security 19% 15% 1.50 Market portfolio 13% 4% Risk free return 2% Expected return Standard deviation Beta Determine the beta of the portfolio
You invest $700 in a security with a beta of 1.4 and $300 in another security with a beta of 0.8. The beta of the resulting portfolio is _________ Group of answer choices a. 1.40 b. 1.00 c. 0.36 d. 1.22 e. 0.80
portfolio.. - Word **** References Mailings Review View Help RCM Acrobat Foxit Reader PDF Foxit PDF 5. The risk-free rate and the expected market rate of return are 0.04 and 0.14, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.25 is equal to: a. 0.004 b. 0.165 C. 0.121 d. 0.132
The UIB company desires to construct a portfolio with 15% expected return. The portfolio is to consist of some combination of security X and security Y, which have the following expected returns, standard deviations of returns, Security X Security Y Market Risk free rate Expected return 8% 19% 13% 2% Standard deviations 6% 15% 4% Beta 0.94 1.5 1. Determine the beta of the portfolio2. Should UIB invest in the portfolio. Justify.3. Compute the correlation between security Y and the market portfolio.
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give me step by step solution In the wonderland country, the return on the market portfolio is 14,45%, and standard deviation of market return is 12,1% and the risk free return is 2,65%. You may form a portfolio with the securities X, Y and Z with the following characteristics: parameters security x security y security z beta 0.96 1.07 1,95 total risk 38.5% 25.4% 23.8% protifolio weight 25% 40% 35% Which security has the lowest total risk? b) If the market return decrease 0,85%, which is the expected impact in security Y return? c) Determine the expected beta and expected return of the portfolio with weights as represented in the table above. d) Determine the unsystematic risk associated to security X
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Assume the APT equation for portfolios A and B with the following system of equations: E[rA] = λ0 + (λ1)3 + (λ2)0.2 = 11.0 E[rB] = λ0 + (λ1)2 + (λ2)1 = 13.0 Assume the following: . The risk free rate is λ0 = Rf = 5 . The expected return on the market portfolio is RM = 10 . Expected returns are consistent with the CAPM. . (hint: note that λ1 = E[RA] − Rf and λ2 = E[RB] − Rf ). Answer the following: (a) What are λ1 and λ2? (b) What is the CAPM β associated with the pure portfolio associated with factor 1? (c) What is the CAPM β associated with the pure portfolio associated with factor 2?

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