You manage a risky portfolio with expected rate of return of 16% and a standard deviation of 28%. The T-bill rate is 3%. Suppose that your client feels that the most she can invest in your portfolio is 60% of her portfolio and she will place the other 40% in a risk-free investment (T-bill. Given this choice, what would be the client's degree of risk aversion, A? 2.51 2.76 2.37 2.44
Q: Suppose you have $2,000 to invest. The market portfolio has an expected return of 10.5 percent and a…
A: Let the weight in Risk free Asset be A Therefore, weight in market portfolio be 1-A
Q: Suppose the risk-free rate is 5.1 percent and the market portfolio has an expected return of 11.8…
A: Standard deviation of market portfolio and portfolio Z is calculated. Then covariance and beta of…
Q: You currently have $100 of 8%. Suppose the risk-free rate is 5%, and there is another portfolio that…
A: capital amount = $ 100,000. r(rp) = rf + x (rm-rf) = 5+x ( 20-5) ratio of standard deviation is…
Q: You want to invest $46,000 in a portfolio with a beta of no more than 1.42 and an expected return of…
A: Amount of investment = $ 46000 Required Beta = 1.42 Required Expected Return = 13.7% Bay Corp.…
Q: The optimal risky portfolio has an expected return of 15% and a standard deviation of 10%. The…
A: Optimal risky portfolio is suitable to risk averse investors who want to minimise their investment…
Q: John Davidson is an investment adviser at Leeds Asset Management plc. He is asked by a client to…
A: Sharpe Ratio = ( Expected rerturn - Risk free rate ) / Standard Deviation
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: The optimal risky portfolio has a Sharpe ratio of 0.8 and a standard deviation of 20%. The minimum…
A: Since both the portfolios have risks higher then the desired risk, we need to combine them with risk…
Q: Given the non-satiation and risk aversion assumptions, which of the following five portfolios has…
A: The question is based on the concept of sharp ratio, which shows the excess return of a portfolio…
Q: A financial advisor is offering you a product with an expected return of 8% and a return standard…
A: A portfolio is a set or group of investments that include the collections of stocks, commodities,…
Q: Your client, Jane Hislop, has an investment portfolio which is 30% invested in Fund 1 and 70%…
A: The beta of a portfolio is nothing but the weighted average of betas of individual assets included…
Q: Suppose an investor is appraising an investment under the following conditions: a. Pi 0.15 Forecast…
A: Since multiple questions are asked , we will answer 1st question for you as per prescribed…
Q: You compute the optimal risky portfolio to have the expected return of 12% and standard deviation of…
A: Here, Expected Return of Portfolio is 12% Standard Deviation is 20% Risk-free rate is 4% Risk…
Q: Helen's portfolio consists solely of an investment in Tombland stock. Tombland has an expected…
A: Let the investment in market portfolio = (1+w) Investment in risk free asset = -w Required return…
Q: Marcus has an investment portfolio that paid the rate of return of 24.75%, -11%, - 30%, 19%, 15.5%,…
A: Arithmetic average is sum of all divided by number of return. Geometric return can be calculated by…
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: You manage a risky portfolio with an expected rate of return of 22% and a standard deviation of 35%.…
A: A mixture of different kinds of funds and securities for the investment is term as the portfolio.
Q: John Davidson is an investment adviser at Leeds Asset Management plc. He is asked by a client to…
A:
Q: Consider a T-bill with a rate of return of 5 percent and the following risky securities. From which…
A: Risk Seekers: Risk seekers willing to pay for taking risk for getting more profits.…
Q: standard
A: To calculate the expected return & SD, following assumptions are made: Let c be the portfolio of…
Q: John Davidson is an investment adviser at Leeds Asset Management plc. He is asked by a client to…
A: Solution- (A)- Sharp ratio=Rp-RfσpwhereRP=Portfolio returnRf=Risk free rateσp=portfolio standerd…
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: You are considering investing $1000 in a complete portfolio. The complete portfolio is composed of…
A: Given: Investment = $1000 Return on treasury bills = 2.5% Weight of X = 35% Weight of Y = 65% Return…
Q: You are told that the expected return of the market portfolio is 10%, and its standard deviation is…
A: Efficient portfolio is define as portfolio that provides the best possible return at a known risk…
Q: You are considering investing $1,100 in a complete portfolio. The complete portfolio is composed of…
A: Risky portfolio: Expected return of risky portfolio=WeightX×ReturnX+WeightY×ReturnYExpected return…
Q: You estimate that the expected return of your portfolio is 30%. The standard deviation of the return…
A: z value = (-20 - 30)/25 = -2 so the probability = (100% - 95.44%)/2 = 2.28%
Q: Elsi is a risk-averse investor. She has invested 60% of her investment in share A and all the…
A: Weight of A = 60% Weight of B = 100% - 60% = 40% Expected return on A = 10% Expected return on B =…
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: Expected return and standard of a risky portfolio are 11% and 21% respectively. Risk-free rate is…
A: Here, Expected Return of Risky Portfolio is 11% Standard Deviation of Risky Portfolio is 21% Risk…
Q: Consider a treasury bill with a rate of return of 5% and the following risky securities: Security A:…
A: A ratio that provides information regarding the return of a security to the investor in comparison…
Q: Consider a risky portfolio, A, with an expected rate of return of 0.15 and a standard deviation of…
A: The risk reward ratio of Portfolio A = Risk / Return = 0.15/0.15 = 1
Q: You are considering investing $1000 in a complete portfolio. The complete portfolio is composed of…
A: In treasury bills:(1-a) in risky portfolio0.35x+0.65y=1-aExpected return from…
Q: You are examining a portfolio manager’s active investing portfolio. The portfolio has a beta of 2…
A: The expected return is the minimum required rate of return which an investor required from the…
Q: You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P,…
A: Weight in Risk Portfolio = 40% Therefore, Weight of X = 40% * 60% = 24% Weight of Y = 40% * 40% =…
Q: You are told that the expected return of the market portfolio is 10%, and its standard deviation is…
A: Market Porfolio Return(Rm)=10% Market Standard Deviation (SDm) =10% Efficient Portfolio Return (Re)=…
Q: You are considering investing $1,000 in a T-bill that pays a rate of return of 0.06 and a risky…
A: Rate of return means the interest rate which is earned by an investor or which a potential investor…
Q: Suppose an investor uses two stocks A and B to build a risky portfolio. The following information is…
A: The optimum portfolio is a combination of different risk assets that provide minimum risk and…
Q: Your Company's manager has a $40 million portfolio with a beta of 1.00. The risk-free rate is 4.25%,…
A:
Q: Consider a small cap value portfolio where the investment manager generates 0.26% of Carhart alpha.…
A: Jensen's alpha is a formula for calculating the risk-adjusted value of an investment. Jensen's alpha…
Q: You manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 36%.…
A: The Expected rate of return or the overall rate of return of the portfolio shows the total return…
Q: An investor puts 60% of her assets in a risky portfolio with an expected return of 15% and variance…
A: The expected return is the amount of profit or loss an investor can anticipate receiving on an…
Q: You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 28%.…
A: Given information in question is as follow Expected rate of return = 18% Standard…
Q: Consider a risky portfolio, A, with an expected rate of return of 0.16 and a standard deviation of…
A: Given: Expected return is 0.16 Standard deviation is 0.25
Q: Your portfolio has a beta of 1.73, a standard deviation of 29 percent, and an expected return of…
A: Treynor ratio = Portfolio Return - Risk Free ReturnPortfolio Beta
Q: Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard…
A: Expected Return = (Weight x Expected Return on Risky Portfolio) + (Weight x Expected Return on…
Q: You form a complete portfolio by investing 30% of your portfolio in a risky portfolio that has an…
A: Given information: Weight of risky portfolio is 30% Expected rate of return is 9% Standard deviation…
Q: John Davidson is an investment adviser at Leeds Asset Management plc. He is asked by a client to…
A: sharpe ratio: sharpe ratio =rp-rfσpwhere,rp=return of portfoliorf=risk free rateσp=standard…
Q: A financial advisor is offering you a product with an expected return of 8% and a return standard…
A: The optimal portfolio is the one that fulfills the following two conditions: The portfolio has a…
Q: Suppose the risk-free rate is 4.2 percent and the market portfolio has an expected return of 10.9…
A: Capital asset pricing model is the most efficient model to calculate the expected rate of return of…
Step by step
Solved in 2 steps
- Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rp) = 9%, Op = 24%, rf = 2%. Required: a. Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 8%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk-free asset? b. What will be the standard deviation of the rate of return on her portfolio? c. Another client wants the highest return possible subject to the constraint that you limit his standard deviation to be no more than 12%. Which client is more risk averse?Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rp) = 8%, op = 15%, rf = 2%. Required: a. Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 8%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk-free asset? b. What will be the standard deviation of the rate of return on her portfolio? c. Another client wants the highest return possible subject to the constraint that you limit his standard deviation to be no more than 12%. Which client is more risk averse? Complete this question by entering your answers in the tabs below. Required A Required B Required C Risky portfolio Risk-free asset Answer is complete but not entirely correct. Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall…Give typing answer with explanation and conclusion Assume that your client would prefer to invest her entire wealth into a portfolio with an annual risk premium of 6% and a standard deviation of 12%. You have constructed a risky portfolio with an expected return of 10% and a standard deviation of 15%. T-Bills are currently yielding 4%. What is the optimal allocation, y, to the risky portfolio given your client's risk preferences? What is the expected return and standard deviation on your client's optimal complete portfolio?
- Consider the following information about a risky portfolio that youmanage, and a risk-free asset: E(rP ) = 11%, σP = 15%, rf = 5%.a) Your client wants to invest a proportion of her total investment budget in your riskyfund to provide an expected rate of return on her overall or complete portfolio equal to8%. What proportion should she invest in the risky portfolio, P, and what proportionin the risk-free asset? b) What will be the standard deviation of the rate of return on her portfolio? c) Another client wants the highest return possible subject to the constraint that you limithis standard deviation to be no more than 12%. Which client is more risk averse?Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rp) = 11%, op = 12%, rf =,2%. Required: a. Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 7%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk-free asset? b. What will be the standard deviation of the rate of return on her portfolio? c. Another client wants the highest return possible subject to the constraint that you limit his standard deviation to be no more than 17%. Which client is more risk averse? Complete this question by entering your answers in the tabs below. Required A Required B Required C Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 7%. What proportion should she invest in the…Give typing answer with explanation and conclusion You have a client that is concerned about minimising downside risk. She would like to choose a portfolio that minimises the probability of a return below the risk free rate. You are given 3 portfolios with varying expected returns and standard deviations. How would you choose the most appropriate portfolio for the client? Please provide an example.
- 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 0.4 0.45 o (R) E[R] Figure (1) shows an investor with a conservative investment behavior. 0.3 0.25 0.2 0.15 0.1 0.05 0 0 Figure (2) shows an investor that borrows in risk-free rate and invests in the risky asset. 0.05 0.1 0.15 In the optimal point of both figures, the highest indifference curve is tangent to the efficient frontier. O In Figure (1), more aggressive investment decision led to a higher Sharpe ratio. Figure 2 0.2 0.25 o(R) 0.3 0.35 0.4 0.45Assume you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 29%. The T-Bill Rate is 3.5%. You have a new client who has historically invested in a portfolio with a risk premium of 11% and a sigma of 22%. What is your client’s Risk Aversion? (rounded to two places) Group of answer choices 2.15 3.11 2.27 2.76 None of the aboveSuppose all investors use the market perceptions of risk and expected return and are thus using the same set of efficient portfolios. 1-Draw the efficient set of portfolios and the CML for the optimal portfolio. 2-Explain why all investors should choose the same risky portfolio from the efficient set 3-Identify on the CML two investors; one who is risk averse and one who is not
- You manage a risky portfolio with an expected rate of return of 22% and a standard deviation of 34%. The T-bill rate is 6%. Your client's degree of risk aversion is A = 1.7. Required: a. What proportion, y, of the total investment should be invested in your fund? b. What are the expected value and standard deviation of the rate of return on your client's optimized portfolio? Complete this question by entering your answers in the tabs below. Required A Required B What proportion, y, of the total investment should be invested in your fund? Note: Round your answer to 2 decimal places. Investment proportion y %Consider an economy with a (net) risk-free return r1 = 0:1 and a market portfolio with normally distributed return, with ErM = 0:2 and 2M = 0:02. Suppose investor A has CARA preferences, with risk aversion coe¢ cient equal to 1 and an endowment of 10. a) Write down the maximization problem for the investor. b) Determine the amount invested in the risky portfolio and in the risk-free asset. c) Suppose another investor (B) has a coe¢ cient of absolute risk aversion equal to 2 (and the same endowment 10). Compute his optimal portfolio and compare it to that of investor A. Explain the di§erent results for investors A and B. d) Finally, consider Investor C with mean-variance preferences Ec V ar(c) (and endowment 10). Compute his optimal portfolio and compare it to that of investors A and B (as obtained in questions b and c). Compare your result with those obtained for investors A and B.Assume an investor with the coefficient of risk aversion A=5.5. To maximize her expected utility, she would choose the asset with an expected rate of return of _______ and a standard deviation of ________, respectively." a. 21%; 16% b. 24%; 21% c. 12%; 30% d. 15%; 5%