Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Chapter 5, Problem 12PS
For Problems 12-16, assume that you manage a risky portfolio with an expected
12. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill
a. What is the expected return and standard deviation of your client’s portfolio?
b. Suppose your risk portfolio includes the following investments in the given proportions:
Stock A 27%
Stock B 33
Stock C 40
What are the investment proportions of each slock in your client’s overall proportion including the position in T-bills’?
c. What is the Sharpe ratio (S) of your risky portfolio and your client’s overall portfolio?
d. Draw the CAL of your portfolio on an expected return/standard deviation diagram. What is the slope of the CAL? Show the position of your client on your fund’s CAL.
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Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rp) = 9%, Op
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12%. Which client is more risk averse?
You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 28%. The T-bill rate is 8%.
Your client’s degree of risk aversion is A = 3.5.a. What proportion, y, of the total investment should be invested in your fund?b. What is the expected value and standard deviation of the rate of return on your client’s optimized portfolio?
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…
Chapter 5 Solutions
Essentials Of Investments
Ch. 5 - Prob. 1PSCh. 5 - The real interest rate approximately equals the...Ch. 5 - When estimating a Sharpe ratio, would it make...Ch. 5 - You’ve just decided upon your capital allocation...Ch. 5 - Prob. 5PSCh. 5 - The stock of Business Adventures sells for $40 a...Ch. 5 - Prob. 7PSCh. 5 - a. Suppose you forecast that the standard...Ch. 5 - Using the historical risk premiums as your guide,...Ch. 5 - What has been the historical average real rate of...
Ch. 5 - Consider a risky portfolio. The end-of-year cash...Ch. 5 - For Problems 12-16, assume that you manage a risky...Ch. 5 - For Problems 12-16, assume that you manage a risky...Ch. 5 - For Problems 12-16, assume that you manage a risky...Ch. 5 - For Problems 12-16, assume that you manage a risky...Ch. 5 - For Problems 12-16, assume that you manage a risky...Ch. 5 - Prob. 17PSCh. 5 - You manage an equity fund with an expected risk...Ch. 5 - What is the reward-to--volatility (Sharpe) ratio...Ch. 5 - A portfolio of nondividend-paying stocks earned a...Ch. 5 - Which of the following statements about the...Ch. 5 - Which of the following statements reflects the...Ch. 5 - Use the following data in answering CFA Questions...Ch. 5 - Prob. 5CPCh. 5 - Lise the following data in answerifng CFA Question...Ch. 5 - Use the following scenario analysis for stocks X...Ch. 5 - Prob. 8CPCh. 5 - Use the following scenario analysis for stocks X...Ch. 5 - 10. Probabilities for three states of the economy...Ch. 5 - 11. An analyst estimates that a stock has the...Ch. 5 - Prob. 1WMCh. 5 - Prob. 2WMCh. 5 - Prob. 3WM
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