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7. Sharpe ratio will be higher if the expected return of the portfolio is higher and/or...
Could portfolio A show a higher Sharpe ratio than that of B and at the same...
Could portfolio A show a higher Sharpe ratio than that of B and at the same time a lower M2 measure? Explain.
15. Which of the following statements is True? When creating a complete portfolio by a risky...
15. Which of the following statements is True? When creating a complete portfolio by a risky portfolio and a risk-free asset, a higher allocation to the risky portfolio increases the Sharpe ratio. The lower the risk-free rate, the lower the Sharpe ratios of levered portfolios. With a positive and fixed risk-free rate, doubling the expected return and standard deviation of the risky portfolio will double the Sharpe ratio. Holding constant the risk premium of the risky portfolio, a higher risk-free...
13. Consider a Market Portfolio with 12% expected return and 20% return standard deviation. If the...
13. Consider a Market Portfolio with 12% expected return and 20% return standard deviation. If the Sharpe ratio of the market portfolio is 0.5, what is the risk-free rate of return? (a) 0.01 (b) 0.02 (c) 0.03 (d) 0.04
Expected Return Standard Deviation Portfolio A 12% 20% Portfolio B 6% 12% T...
Expected Return Standard Deviation Portfolio A 12% 20% Portfolio B 6% 12% T-bill 3% 0% You are an investment adviser and you have the three investments above to recommend to your clients. The correlation between A and B is -0.5. Solve for the optimal risky portfolio and enter the weights as a %, 99% should be entered as 99.00%. Percent invested in Portfolio A Percent invested in Portfolio B What is the standard deviation of the optimal risky portfolio? What...
3. Which of the following statements are true? Please Explain. a. A lower allocation to the...
3. Which of the following statements are true? Please Explain. a. A lower allocation to the risky portfolio reduces the Sharpe (reward-to-volatility) ratio. b. The higher the borrowing rate, the lower the Sharpe ratios of levered portfolios. c. With a fixed risk-free rate, doubling the expected return and standard deviation of the risky portfolio will double the Sharpe ratio. d. Holding constant the risk premium of the risky portfolio, a higher risk-free rate will increase the Sharpe ratio of investments...
Portfolio analvsis (8 points L3 points) Asset A has an expected return of 10% and a...
Portfolio analvsis (8 points L3 points) Asset A has an expected return of 10% and a Sharpe ratio of 0.4. Asset B bas ans expectod retum of 15% and a Sharpe ratio of o3. Asset C has an expected return of 20% and a Sharpe ratio of 0.35. A risk-averse investor would prefer to build a complete portfolio using the risk free asset and a Asset A b. Asset B c Asset C d. No risky asset 2 (3 points)...
You manage a risky portfolio with an expected rate of return of 19% and a standard...
You manage a risky portfolio with an expected rate of return of 19% and a standard deviation of 33%. The T-bill rate is 7%. Your client chooses to invest 80% of a portfolio in your fund and 20% in a T-bill money market fund. What is the reward-to-volatility (Sharpe) ratio (S) of your risky portfolio? Your client’s? (Do not round intermediate calculations. Round your answers to 4 decimal places.) Your reward-to-volatility ratio?________ Clients' reward-to-volatility ratio?_________
Consider the following information: Portfolio Expected Return Standard Deviation Risk-free 5.0 % 0 % Market 10.6...
Consider the following information: Portfolio Expected Return Standard Deviation Risk-free 5.0 % 0 % Market 10.6 23 A 8.6 12 a. Calculate the Sharpe ratios for the market portfolio and portfolio A. (Round your answers to 2 decimal places.) Sharpe Ratio Market portfolio Portfolio A b. If the simple CAPM is valid, is the above situation possible? y/n
1. The riskless interest rate is 2%. You hold a portfolio consisting of short-term safe assets...
1. The riskless interest rate is 2%. You hold a portfolio consisting of short-term safe assets and the market portfolio of risky assets, which has a mean return of 7% and a standard deviation of 20%. You are considering the stock of Microsoft Inc. that you believe to have a beta of 1.2 with the market portfolio, and a standard deviation of return of 30%. a) What is the standard deviation of the idiosyncratic component of Microsoft's return (the residual...
You manage a risky portfolio with an expected return of 12% and a standard deviation of 24%. Assume that you can invest...
You manage a risky portfolio with an expected return of 12% and a standard deviation of 24%. Assume that you can invest and borrow at a risk-free rate of 3%, using T-bills. a. Draw the Capital Allocation Line (CAL) for this combination of risky portfolio and risk-free asset. What is the Sharpe ratio of the risky portfolio? b. Your client chooses to invest 50% of their funds into your risky portfolio and 50% risk-free. What is the expected return and...
15. Which of the following statements is True? When creating a complete portfolio by a risky portfolio and a risk-free asset, a higher allocation to the risky portfolio increases the Sharpe ratio. The lower the risk-free rate, the lower the Sharpe ratios of levered portfolios. With a positive and fixed risk-free rate, doubling the expected return and standard deviation of the risky portfolio will double the Sharpe ratio. Holding constant the risk premium of the risky portfolio, a higher risk-free...
13. Consider a Market Portfolio with 12% expected return and 20% return standard deviation. If the Sharpe ratio of the market portfolio is 0.5, what is the risk-free rate of return? (a) 0.01 (b) 0.02 (c) 0.03 (d) 0.04
3. Which of the following statements are true? Please Explain. a. A lower allocation to the risky portfolio reduces the Sharpe (reward-to-volatility) ratio. b. The higher the borrowing rate, the lower the Sharpe ratios of levered portfolios. c. With a fixed risk-free rate, doubling the expected return and standard deviation of the risky portfolio will double the Sharpe ratio. d. Holding constant the risk premium of the risky portfolio, a higher risk-free rate will increase the Sharpe ratio of investments...
Portfolio analvsis (8 points L3 points) Asset A has an expected return of 10% and a Sharpe ratio of 0.4. Asset B bas ans expectod retum of 15% and a Sharpe ratio of o3. Asset C has an expected return of 20% and a Sharpe ratio of 0.35. A risk-averse investor would prefer to build a complete portfolio using the risk free asset and a Asset A b. Asset B c Asset C d. No risky asset 2 (3 points)...
1. The riskless interest rate is 2%. You hold a portfolio consisting of short-term safe assets and the market portfolio of risky assets, which has a mean return of 7% and a standard deviation of 20%. You are considering the stock of Microsoft Inc. that you believe to have a beta of 1.2 with the market portfolio, and a standard deviation of return of 30%. a) What is the standard deviation of the idiosyncratic component of Microsoft's return (the residual...
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