Portfolio A =Expected Return -(Risk Free Rate+Beta*(Market
Return-Risk Free Rate)) =12%-(5%+0.7*(13%-5%))=1.40%
Portfolio B =Expected Return -(Risk Free Rate+Beta*(Market
Return-Risk Free Rate)) =16%-(5%+1.4*(13%-5%))=-0.20%
Based on current dividend yields and expected capital gains, the expected rates of return on portfolios...
Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 12% and 16%, respectively. The beta of A is 0.7, while that of B is 1.4. The T-bill rate is currently 5%, whereas the expected rate of return of the S&P 500 index is 13%. The standard deviation of portfolio A is 12% annually, that of B is 31%, and that of the S&P 500 index is 18%. a. Calculate...
Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 7.1% and 8.3%, respectively. The beta of A is .6, while that of B is 1.5. The T-bill rate is currently 4%, while the expected rate of return of the S&P 500 index is 8%. The standard deviation of portfolio A is 21% annually, while that of B is 42%, and that of the index is 31% Think about what...
Based on current dividend yields and expected capital gains, the expected rate of returns on portfolio A and B are 10% and 11% respectively. The beta of portfolio A is 0.80 while that of B is 1.4. risk-free rate is 6%, while expected return of the market portfolio is 10%. The standard deviation of portfolio A is 25% , while that of B is 22%, and that of the stock market index is 20%. (a) If you currently hold a...
Question 5 (8 points) a. The expected rates of return for stocks A and B are 16% and 20% respectively. The beta of stock A is 0.7 while that of stock B is 0.8. The T-bill rate is 4% and the expected rate of return on S&P 500 index is 24%. The standard deviation of stock A is 20% while that of B is 32%. If you could invest only in T-bills plus one of these stocks, which stock would...
a. Based on the current portfolio composition and the expected rates of return given above, what is the expected rate of return for Barry's portfolio? b. Barry is considering a reallocation of his investments to include more Treasury bills and less exposure to emerging markets. If Barry moves all of his money from the emerging market fund and puts it in Treasury bills, what will be the expected rate of return on the resulting portfolio? (Portfolio expected rate of return)...
The projected rate of return on stocks A and B are 13% and 18%, respectively. Their standard deviations are 11% and 9% respectively. Stock A has beta of 0.5 and Stock B has beta of 1.5. The T-bill rate and the expected rate of return on the S&P/TSX index are 6% and 16%,respectively. If you currently hold a well-diversified passive index portfolio, would you buy any of the two stocks? If yes, which one?
Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 13% with a standard deviation of 25%. a. What is the slope of the CML?
You are managing a risky portfolio with an expected return of 15%, a variance of 0.0784, and a beta of 1.4. Suppose that the T-bill rate is 5% and the S&P500 stock index (as the market index) has an expected return of 10% and a variance of 0.04. Your client chose to invest 80% of her portfolio in your fund and the rest in a T-bill money market fund. What is the Sharpe ratio of your client’s portfolio? A. 0.4466...
Different investor weights. Two risky portfolios exist for investing: one is a bond portfolio with a beta of 0.7 and an expected return of 6.5 % , and the other is an equity portfolio with a beta of 1.4 and an expected return of 16.6 % If these portfolios are the only two available assets for investing, what combination of these two assets will give the following investors their desired level of expected return? What is the beta of each...
An investor holds two well-diversified portfolios on US securities. The expected return on portfolio A is 13% and the expected return on portfolio B is 8%, and βA = 1 and βB = 0.7. What should be the risk-free rate according to the CAPM?