You are a Morgan Stanley portfolio manager of a risky portfolio with an expected rate of return of 17% and a standard deviation of 28 %. The T - bill rate is 4%. Suppose your client decides to invest in your risky portfolio a proportion (y) of his total investment budget so that his overall portfolio will have a standard deviation of 10% . a. What is the proportion y ?

You are a Morgan Stanley portfolio manager of a risky portfolio with an expected rate of return of 17% and a standard deviation of 28 %. The T - bill rate is 4%. Suppose your client decides to invest in your risky portfolio a proportion (y) of his total investment budget so that his overall portfolio will have a standard deviation of 10% . a. What is the proportion y ?

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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Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 27% 33 40 Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 15%. Required: a. What is the proportion y? (Round your answer to 1 decimal place.) Proportion y 0.8 X %
Suppose an investor uses two stocks A and B to build a risky portfolio. The following information is given: E(r_A)=10%,E(r_B)=12%,0_A=15%,o_B=20%, p_AB=0.4,r_f=2%. Denote the optimal risky portfolio investor can achieve with the highest Sharpe ratio by portfolio O. Calculate the weights of A and B (w_A and w_B) in the optimal risky portfolio O. Calculate the expected return and standard deviation of return for portfolio O. Calculate the Sharpe ratio of portfolio O.
Consider the single factor APT. Portfolio A has a beta of 1.5 and an expected return of 20 %. Portfolio B has a beta of 0.7 and an expected return of 16%. The risk - free rate of return is 8%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio and a long position in portfolio
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 15% and a standard deviation of return of 16.0%. Stock B has an expected return of 11% and a standard deviation of return of 4%. The correlation coefficient between the returns of A and B is 0.50. The risk-free rate of return is 7%. The proportion of the optimal risky portfolio that should be invested in stock A is __________.
K You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 37%. The T-bill rate is 4%. Your client chooses to invest 80% of a portfolio in your fund and 20% in a T-bill money market fund. What is the reward-to-volatility (Sharpe) ratio (S) of your risky portfolio? Your client's? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Your reward-to-volatility (Sharpe) ratio Client's reward-to-volatility (Sharpe) ratio
You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 34%. The T-bill rate is 4%. Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject to the constraint that the complete portfolio's standard deviation will not exceed 10%. Required: a. What is the investment proportion, y? b. What is the expected rate of return on the complete portfolio?
You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 33%. The T-bill rate is 2%. Your client chooses to invest 75% of a portfolio in your fund and 25% in an essentially risk-free money market fund. What are the expected return and standard deviation of the rate of return on his portfolio? Note: Round your answers to 2 decimal places. Expected return Standard deviation % %
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 17% and a standard deviation of return of 28%. Stock B has an expected return of 15% and a standard deviation of return of 15%. The correlation coefficient between the returns of A and B is 0.8. The risk-free rate of return is 3.2%. What is the expected return on the optimal risky portfolio? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
2. You are designing a risky portfolio based on two stocks, A and B. A has expected return of 15% and standard deviation of return 20%. B has expected return of 20% and standard deviation of return 10%. The correlation coefficient between A and B is 0.5. The risky free rate of return is 8%. The proportion of the optimal risky portfolio that should be invested in A is?
1. Suppose you have n risky assets you can combine in a portfolio. Each risky asset has an expected return of 8% and a standard deviation of 30%. The risky assets are uncorrelated with each other. (a) Consider an equally weighted portfolio of 2 of these securities. What is its expected return? What will its standard deviation be? (b) Consider an equally weighted portfolio of 30 of these securities. What is its expected return? What will its standard deviation be? (c) Suppose we let the number of these securities increase without bound. That is, n→ ∞o. What happens to the standard deviation of an equally weighted portfolio of these securities as the number of assets in the portfolio becomes extremely large? What will the riskless rate be in this case, and why? -int IDE
Suppose the risk-free return is 2% and the return on the market is 10%. The beta of a managed portfolio is 1.5, and the average realized return is 13%. According to the CAPM, Jensen’s alpha of the managed portfolio is: A) –1% B) 0% C) 1% D) 2% E) none of the above
You manage a risky portfolio with an expected rate of return of 13% and a standard deviation of 34%. The T-bill rate is 2%. Stock A Stock B Stock C 45% 32% 23% Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 11%. Required: a. What is the proportion y? b. What are your client's investment proportions in your three stocks and the T-bill fund? c. What is the standard deviation of the rate of return on your client's portfolio? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the proportion y? Note: Round your answer to the nearest whole number. Proportion y %

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