You estimate that a passive portfolio, that is, one invested in a risky portfolio that mimics the S&P 500 stock index, yields an expected rate of return of 13% with a standard deviation of 25%. You manage an active portfolio with expected return 18% and standard deviation 28%. The risk-free rate is 8%. i) Draw the CML and your funds' CAL on an expected return-standard deviation diagram. ii) What is the slope of the CML? iii) Characterize in one short paragraph the advantage of your fund over the passive fund.
Q: A mutual fund manager has a $40.00 million portfolio with a beta of 1.00. The risk-free rate is…
A: Beta in above problem can be calculated by using CAPM Expected rate of return =Risk free rate +…
Q: what is the Sharpe ratio of this portfolio?
A: Information Provided: Return = 25.30% Standard deviation = 31% T-bills = 5%
Q: An investment portfolio consists of two securities, X and Y. The weight of X is 30%. Asset X's…
A: a. expected return of portfolio=wx×rx+wy×ry=0.3×15%+0.7×23%=20.6% answer: expected return = 20.6%
Q: A portfolio that combines the risk-free asset and the market portfolio has an expected return of 6.2…
A: Formula for expected return is: E(r) = Rf + Beta(Rm - Rf)
Q: Consider a portfolio consisting of the following three stocks: The volatility of the market…
A: By using the CAPM approach, the expected return of the stock is calculated. A portfolio consists of…
Q: Consider a portfolio consisting of the following three stocks: E. The volatility of the market…
A: This is a complex question with several subparts, so according to Bartleby guidelines, we will…
Q: Assume that you manage a risky portfolio with an expected rate of return of 14% and a standard…
A: a.Calculation of Proportion y:The Proportion y is 87.50%.
Q: You are a portfolio manager of a global equity fund of funds UITF. You decided to hold a portfolio…
A: Here, Proportion invested in S&P Index (Ws) is 80% Proportion invested in Blackrock Index (Wb)…
Q: You have a portfolio with a standard deviation of 29% and an expected return of 19%. You are…
A: given, rp=19%σp=29%wp=0.8wstock=0.2
Q: You estimate that a passive portfolio, that is, one invested in a risky portfolio that mimics the…
A: On Risky Portfolio- Expected Rate of Return= 13% Standard Deviation= 25% On Active Portfolio-…
Q: Suppose that Jerry Tan has surplus funds to invest in both stocks, Alpha and Beta. He has decided to…
A: For Stock: Expected return E(r) = ∑p*r Standard deviation = √∑p*(r-E(r))2 For portfolio: Expected…
Q: Consider a portfolio consisting of the following three stocks: . The volatility of the market…
A: portfolio weight volatility correlation with market beta expected return HEC CORP 0.23 11% 0.33…
Q: EXPECTER RETURN OF A PORTFOLIO please see attatch file
A: Expected return on portfolio is sum of weighted return on individual stocks
Q: A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7…
A: A portfolio is a combination or group of financial instruments and securities that are held by an…
Q: An analyst wants to evaluate Portfolio X, consisting entirely of U.S. common stocks, using both the…
A: The Treynor measure (T) relates the rate of return earned above the risk‑free rate to the…
Q: A portfolio has an average return of 14.4 percent, a standard deviation of 18.5 percent, and a beta…
A: The Sharpe ratio: The Sharpe ratio is one of the most commonly used measures to assess the…
Q: Suppose that the risk-free rate ry = 0.03, the expected market return µM = 0.11, and the market…
A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: Your portfolio has a beta of 1.24, a standard deviation of 14.3 percent, and an expected return of…
A: Portfolio beta = 1.24 Standard deviation = 14.3% Expected return = 12.50% Market return = 10.7% Risk…
Q: An analyst has modeled the stock of a company using a FamaFrench three-factor model and has…
A: Computation of predicted Return and unexplained Return is shown below: Hence, predicted return is…
Q: Calculate covariance and coefficient of correlation between the returns of the stocks A and B.
A: Covariance is calculated by analyzing at-return surprises (standard deviations from the expected…
Q: Consider the following information: the risk-free rate is 2%, and the expected rate of return on the…
A: Risk free rate (Rf) = 2% Market portfolio return (Rm) = 10% Beta = 1.5 We need to find the required…
Q: When the return on the market portfolio goes up by 5%, the return on Stock A goes up on average by…
A: Return is the basic factor which affects the investor’s decision. CAPM is the tool which is used to…
Q: Suppose the risk-free rate is 6 percent and the market portfolio has an expected return of 12…
A: The question can be answered by determining the expected return for the stock using the capital…
Q: You hold a portfolio consisting of two stocks. Stock Abc has an expected return of 209 and a…
A: expected return = 0.6*20% + 0.4*12% = 16.80%
Q: You are considering investing $1,000 in a T-bill that pays 0.06 and a risky portfolio, P,…
A: To solve the question we first need to determine the expected return of the risky portfolio then…
Q: An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of…
A: The weights of assets A & B in minimum variance portfolio is given by the expressions below. The…
Q: Portfolios A and B are actively managed. Based on current dividend yields and expected capital gains…
A: given, ra=10%rb=17%betaa=0.5betab=1.4rf=2%rm=12%σa=26%σb=35%σm=21%
Q: Consider an investment portfolio that consists of three different stocks, with the amount invested…
A: Given The risk free rate is 2.5% The market risk premium is 6%
Q: A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7…
A: An expected return is defined as the profit / loss, where an investors used to anticipate on their…
Q: An analyst wants to evaluate Portfolio X, consisting entirely of U.S. common stocks, using both the…
A: Treynor ratio = (Average return - Risk free rate)/Beta Sharpe ratio = (Average return - Risk free…
Q: Suppose Johnson & Johnson and the Walgreen Company have the expected returns and volatilities shown…
A: GIVEN, rjohn=6.8%rwal=10.5%σjohn=15.2%σwal=19.8%corr=21.4%wjohn=0.5wwal=0.5
Q: Assume that you manage a risky portfolio with an expected rate of return of 18% and a standard…
A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: Suppose, a passive portfolio, that is, one invested in a risky portfolio that mimics the DSE Broad…
A: Ans: (i) Currently the client has invested in active portfolio. So his expected return is 13% and…
Q: Need help
A: The formula to calculate required return is given below:
Q: assume that you manage a risky portfolio with an expected rate of return of 17% and a standard…
A: Hello. Since your question has multiple parts, we will solve first question for you. If you want…
Q: Currently, the risk-free return is 4 percent, and the expected market rate of return is 11 percent.…
A: In this we have to calculate the beta of portfolio and from that we will get expected return of…
Q: Consider stocks of Firms A and B. Their expected returns are 12% and 11%, respectively, and the…
A: In the given question we are provided with the information regarding stocks of two firms A and B.…
Q: Currently the risk-free rate equals 5% and the expected return on the market portfolio equals 11%.…
A: Given: Risk free rate “Rf” = 5% Market return “Rm” = 11% Stock A Beta = 1.33 Stock B Beta = 0.7…
Q: You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000…
A: Expected Return = Risk risk rate + beta of portfolio * market risk premium Beta of portfolio =…
Q: Consider two types of assets: market portfolio (M) and stock A. The expected return is 8% and…
A: Given: Market rate = 8% Risk free rate = 2% Standard deviation of market portfolio = 15% Standard…
Q: Consider a portfolio consisting of the following three stocks: . The volatility of the market…
A: given, rf=3%rm=8%σm=10% portfolio weights volatility correlation HEC 0.23 11% 0.33 Green…
Q: You are given the following information about a portfolio consisting of stocks X, Y, and Z: Stock…
A: The provided table is: Stock Investment Expected return X 10,000 8% Y 15,000 12% Z 25,000…
Q: You estimate that a passive portfolio, that is, one invested in a risky portfolio that mimics the…
A: Here, Expected Return of Passive Portfolio is 13% Standard Deviation of Passive Portfolio is 25%…
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
- You estimate that a passive portfolio, for example, one invested in a risky portfolio that mimics the S&P 500 stock index, offers an expected rate of return of 13% with a standard deviation of 25%. You manage an active portfolio with expected return 18% and standard deviation 28%. The risk-free rate is 8%.Draw the CML and your funds’ CAL on an expected return–standard deviation diagram. What is the slope of the CML?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 = -0.14You 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 0.9785
- Assume that using the Security Market Line(SML) the required rate of return(RA)on stock A is found to be halfof the required return (RB) on stock B. The risk-free rate (Rf) is one-fourthof the required return on A. Return on market portfolio is denoted by RM. Find the ratioof betaof A(A) tobeta of B(B). Thank you for your help.Suppose the total risk of Portfolios A, B and C are 49% ², 64%² and 100% ² respectively. The market price of risk is 8%. The Market Portfolio (M) has an expected return and a total risk of 11% and 100% respectively. (a) You want to form another Portfolio H by investing $7,000 in Portfolio A and $3,000 in Portfolio B. Compute the standard deviation of Portfolio H if the correlation coefficient between Portfolio A and Portfolio B is: i) perfectly positively correlated ii) uncorrelated iii) perfectly negatively correlated (b) If the expected return of Portfolio C is 9.4% and it is lying on the Securities Market Line, what is the beta of Portfolio C? State the answer in %². (c) Is Portfolio C a Market Portfolio as it has same level of total risk (i.e. 100% 2) as the Market Portfolio? Why or Why not?You 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 ratioAssume 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?You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Op 1.45 1.20 0.75 1.00 Portfolio: X Y Z Market Risk-free Rp 11.00% 10.00 8.10 10.40 5.20 Information ratio Op 33.00% 28.00 18.00 23.00 0 Assume that the tracking error of Portfolio X is 9.10 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. 02148 0
- Suppose you are given stocks A and B. Stock A has an expected return of 11% and a standard deviation of 4%. Stock B has an expected return of 21% and a standard deviation of 10%. The correlation between them is -1. Suppose it is possible to borrow at the risk-free rate, rf. What must be the value of the risk-free rate? (Hint: Think about constructing a risk-free portfolio from stocks A and B.) (Round answer to 3 decimal places.)The following portfolios are being considered for investment. During the period under consideration, RFR = 0.07.Portfolio Return Beta σiA 0.15 1.0 0.05B 0.20 1.5 0.10C 0.10 0.6 0.03D 0.17 1.1 0.06Market 0.13 1.0 0.04 a. Compute the Sharpe measure for each portfolio and the market portfolio. b. Compute the Treynor measure for each portfolio and the market portfolio. c. Rank the portfolios using each measure, explaining the cause for any differences you find in the rankings.Suppose we have the following information: Securit Amount Invested Expected Return Beta Stock A RM1 ,OOO 8% 0.80 Stock B RM2,OOO 12% 0.95 Stock C RM3,OOO 15% 1.10 Stock D RM4,OOO 18% a) Compute the expected return on this portfolio. b) Calculate the beta of the portfolio. c) Does this portfolio have more or less systematic risk than an average asset? Explain.