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

You invest in a portfolio of 5 stocks with an equal investment in each one. The betas of the 5 stocks are as follows: 0.8, -1.3, 0.95, 1.2, and 1.4. The risk-free return is 3% and the market return is 7%. a. Compute the beta of the portfolio. b. Compute the required return of the portfolio.

*Stock A has a beta of 1.3 and an expected return of 10.2. Stock B has a beta of 0.8 and an expected return of 8.7. If these stocks are priced correctly according to the CAPM, what is the risk-free rate? Give your answer in percentage to the nearest basis point.

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 came up with the following calculations; Assume your utlity function is represented by U E(Rp) 1/2A\sigma_p^2 where your risk aversion parameter A = 25. What is the weight that you must invest in Stock C in order to create your Optimal Portfolio? Present result in decimals, for example, 0.78, not 78 %. Round to 4 decimals. Your Answer: Answer

(Portfolio VaR) Suppose there are two investments A and B. Either investment A or B has a 4.5% chance of a loss of $15 million, a 2% chance of a loss of $2 million, and a 93.5% change of a profit of $2 million. The outcomes of these two investments are independent of each other.

Consider two types of assets: market portfolio (M) and stock A. The expected return is 8% and standard deviation of the market portfolio is 15%. The risk-free rate is 2%. The standard deviation of market portfolio returns is 15%. The standard deviation of stock A is 30%, and the beta coefficient is 1.   Draw the capital market line and show the position of stock A.

You have estimated the single index model (SIM) fund B and found that its alpha and beta are 0.035 and 1.1 respectively. The standard deviation of Fund B's excess returns is 30% and the market portfolio excess returns have a standard deviation of 20%. What's the information ratio of Fund B?

Assume that using the Security Market Line(SML) the required rate of return(RA)on stock A is found to be half of 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 ratio of beta of A(A) to beta of B(B).

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?