Which of the following portfolio risk-return combinations yields the best CAL for investors assuming a risk- free rate of 4.2%? O a. E[r] = 20.6%, O = 22.3% O b. E[r] 16.3%, O = 42.9% Oc. E[r]= 19.8%, = 33.4% O d. E[r] = 10.5%, O = 17.8% e. E[r]=7.8%, σ = 36.4% =
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![Which of the following portfolio risk-return combinations yields the best CAL for investors assuming a risk-
free rate of 4.2%?
a. E[r] =20.6%, o = 22.3%
O b. E[r] = 16.3%, σ = 42.9%
c. E[r]=19.8%, = 33.4%
d. E[r]= 10.5%, σ = 17.8%
e. E[r]=7.8%, σ = 36.4%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4d420b9a-482d-47e6-8321-72477fc946ab%2F6720d485-7618-49d8-b831-a7d33be1ef82%2Flvat4u_processed.png&w=3840&q=75)
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- What are the expected return and the standard deviation of return on in the optimal risky portfolio if an investor lends? O a EG)=14.00 %, o =21.37% Ob. EG)=18.00%, o =27.34% Oc EG)=13.50%, o =25.99% Od E)=14.00%, a =22.67% Oe. EG)=13.50%, o =22.16%According to CAPM, the expected rate of return of a portfolio with a beta of 1.0 and an alpha of 0 is:a. Between rM and rf .b. The risk-free rate, rf .c. β(rM − rf).d. The expected return on the market, rM.Which of the following portfolio risk-return combinations yields the best CAL for investors assuming a risk-free rate of 5.5%? O a. E[r] = 7.9%, o = 17.2% O b. E[r]= 24.1%, o = 26.9% O c. E[r]= 25.2%, o = 18.6% O d. E[r]= 19.0%, o = 22.4% O e. E[r]= 23.6%, o = 22.6%
- Given the non-satiation and risk aversion assumptions, which of the following five portfolios has the most desirable risk and return characteristics and thus will be chosen by investors ? The risk-free rate of return is 6%. (Explain or justify your answer briefly.) Portfolio Average Annual Return (%) Standard Deviation (%) R2 14 21 0.70 K 16 24 0.98 Q 24 28 0.96 17 25 0.92 11 18 0.60Consider 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 = -0.14An optimal risk portfolio’s expected return is 14%, standard deviation is 22%. If risk-free rate is 6%, then what would be slope of the best CAL? A) 0.64B) 0.14C) 0.08D) 0.33E) 0.36
- You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 13.5% бр 35.00% 12.5 30.00 7.1 20.00 10.6 4.4 25.00 0 Вр 1.55 1.20 0.80 1.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.70. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places. × Answer is complete but not entirely correct. R-squared 0.9785You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: 8p 1.70 1.30 0.85 1.00 Portfolio X Y Z Market Risk-free Rp 11.5% 10.5 7.2 10.9 4.6 R-squared op 38.00% 33.00 23.00 28.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.76. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places.You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 16.00% бр 32.00% 15.00 27.00 7.30 17.00 11.30 5.80 22.00 0 Bp 1.90 1.25 0.75 1.00 0 Assume that the tracking error of Portfolio X is 13.40 percent. What is the information ratio for Portfolio X? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places. Information ratio
- 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?The following figures show the optimal portfolio choice for two investors with different levels of risk-aversion graphically. Which statement is correct? E[R] 0.3 0.25 0.2 0.15 0.1 0.05 0 0 0.05 0.1 0.15 Figure 1 0.2 0.25 0.3 0.35 o(R) 0.4 0.45 [H]Z 0.3 0.25 0.2 0.15 0.1 0.05 0 0 0.05 0.1 Figure (2) shows an investor that borrows in risk-free rate and invests in the risky asset. Figure (1) shows an investor with a conservative investment behavior. In the optimal point of both figures, the highest indifference curve is tangent to the efficient frontier. In Figure (1), more aggressive investment decision led to a higher Sharpe ratio. 0.15 Figure 2 0.2 0.25 o (R) 0.3 0.35 0.4 0.45Suppose that the risk-free rate r, = 0.03, the expected market return uM = 0.11, and the market volatility oM = 0.16. Stock A has beta = 1.2 and diversifiable risk o̟ = 0.08. Stock B has beta = 0.8 and 0, = 0.03. Stock C has beta = 1.5 and o̟ = 0.1. Consider a portfolio P which is 45% in Stock A, 25% in Stock B, and 30% in Stock C. (a) Find the value of beta for this portfolio. (b) Assuming CAPM, find the portfolio's expected return µp. (c) Find the standard deviation of the portfolio's systematic (or mar- ket) risk. (d) Find the standard deviation o, of the diversifiable risk of P. (You may assume that the diversifiable risks of A,B, and C are uncorrelated.)