Adequate information: Market expected return [E(R M )] = 11.5% or 0.115 Market standard deviation (σ M ) = 19% or 0.19 Risk-free rate (R f ) = 1.4% or 0.041 Standard deviation of portfolio (σ p ) = 9% or 0.09 To compute: Expected return on the portfolio. Introduction: Expected return on the portfolio refers to the return that is anticipated on the portfolio as a whole.

Question

Want to see the full answer?

Answer 1

Question

Chapter 11, Problem 30QAP

a.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Standard deviation of portfolio (σ_p) = 9% or 0.09

To compute: Expected return on the portfolio.

Introduction: Expected return on the portfolio refers to the return that is anticipated on the portfolio as a whole.

b.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Expected return of portfolio [E(R_P)] = 20% or 0.20

To compute: Standard deviation on the portfolio

Introduction: The standard deviation on the portfolio measures the risk or inherent volatility of an investment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

b. A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent. The risk-free rate is 4 percent, and the Page 7 of 33 expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .45 correlation with the market portfolio and a standard deviation of 55 percent?

b. A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent. The risk-free rate is 4 percent, and the expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a 45 correlation with the market portfolio and a standard deviation of 55 percent?

Suppose the risk-free rate is 6 percent and the market portfolio has an expected return of 12 percent. The market portfolio has a standard deviation of 7 percent. Portfolio Z has a correlation coefficient with the market of 0.35 and standard deviation of 6 percent. According to the capital asset pricing model, what is the expected return on portfolio Z a. 12.6 percent b. 7.8 percent c. 9.87 percent d. 12.05 percent

Answer 2

Question

Chapter 11, Problem 30QAP

a.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Standard deviation of portfolio (σ_p) = 9% or 0.09

To compute: Expected return on the portfolio.

Introduction: Expected return on the portfolio refers to the return that is anticipated on the portfolio as a whole.

b.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Expected return of portfolio [E(R_P)] = 20% or 0.20

To compute: Standard deviation on the portfolio

Introduction: The standard deviation on the portfolio measures the risk or inherent volatility of an investment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 11, Problem 30QAP

a.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Standard deviation of portfolio (σ_p) = 9% or 0.09

To compute: Expected return on the portfolio.

Introduction: Expected return on the portfolio refers to the return that is anticipated on the portfolio as a whole.

b.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Expected return of portfolio [E(R_P)] = 20% or 0.20

To compute: Standard deviation on the portfolio

Introduction: The standard deviation on the portfolio measures the risk or inherent volatility of an investment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 11, Problem 30QAP

a.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Standard deviation of portfolio (σ_p) = 9% or 0.09

To compute: Expected return on the portfolio.

Introduction: Expected return on the portfolio refers to the return that is anticipated on the portfolio as a whole.

b.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Expected return of portfolio [E(R_P)] = 20% or 0.20

To compute: Standard deviation on the portfolio

Introduction: The standard deviation on the portfolio measures the risk or inherent volatility of an investment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 11, Problem 30QAP

a.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Standard deviation of portfolio (σ_p) = 9% or 0.09

To compute: Expected return on the portfolio.

Introduction: Expected return on the portfolio refers to the return that is anticipated on the portfolio as a whole.

b.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Expected return of portfolio [E(R_P)] = 20% or 0.20

To compute: Standard deviation on the portfolio

Introduction: The standard deviation on the portfolio measures the risk or inherent volatility of an investment.

Answer 6

Chapter 11, Problem 30QAP

a.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Standard deviation of portfolio (σ_p) = 9% or 0.09

To compute: Expected return on the portfolio.

Introduction: Expected return on the portfolio refers to the return that is anticipated on the portfolio as a whole.

Answer 7

Chapter 11, Problem 30QAP

a.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Standard deviation of portfolio (σ_p) = 9% or 0.09

To compute: Expected return on the portfolio.

Introduction: Expected return on the portfolio refers to the return that is anticipated on the portfolio as a whole.

Answer 8

b.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Expected return of portfolio [E(R_P)] = 20% or 0.20

To compute: Standard deviation on the portfolio

Introduction: The standard deviation on the portfolio measures the risk or inherent volatility of an investment.

Answer 9

b.

Summary Introduction

Adequate information:

Market expected return [E(R_M)] = 11.5% or 0.115

Market standard deviation (σ_M) = 19% or 0.19

Risk-free rate (R_f) = 1.4% or 0.041

Expected return of portfolio [E(R_P)] = 20% or 0.20

To compute: Standard deviation on the portfolio

Introduction: The standard deviation on the portfolio measures the risk or inherent volatility of an investment.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 13

Ch. 11 - Diversifiable and Nondiversifiable Risks In broad...Ch. 11 - Systematic versus Unsystematic Risk Classify the...Ch. 11 - Expected Portfolio Returns If a portfolio has a...Ch. 11 - Diversification True or false: The most important...Ch. 11 - Portfolio Risk If a portfolio has a positive...Ch. 11 - Beta and CAPM Is it possible that a risky asset...Ch. 11 - Covariance Briefly explain why the covariance of a...Ch. 11 - Prob. 8CQ Ch. 11 - Prob. 9CQ Ch. 11 - Prob. 10CQ

Solution Summary: The author explains that the expected return on the portfolio is 7.61%. The standard deviation measures the risk or inherent volatility of an investment.

Want to see the full answer?

Chapter 11 Solutions