Homework Answers
Answer a) Risk premium of Assets = Ri - Rf = 10%-2% = 8%
Answer b) Sharpe ratio, 
=> S = (10-2)/16 = 0.5.
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Assume the average return on asset i over the prior 10 years was 10% with a...
13) An important measure of asset performance is called Sharpe ratio which is defined as ,...
13) An important measure of asset performance is called Sharpe ratio which is defined as , where and are the asset return and volatility (standard deviation of returns) respectively, and is risk- free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A or B) provides...
6) Over a 25-year period an asset had an arithmetic return of 13.1 percent and a geometric return of 12.6 percent....
6) Over a 25-year period an asset had an arithmetic return of 13.1 percent and a geometric return of 12.6 percent. Using Blume's formula, what is your best estimate of the future annual returns over the next 10 years? A) 11.84 percent B) 13.04 percent C) 12.46 percent D) 11.18 percent E) 12.91 percent 6 7) Which one of the following statements is correct based on the period 1926-2016? A) The standard deviation of the annual rate of inflation was...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR=***,...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR=***, where R and o are the asset return and volatility (standard deviation of returns) respectively, and Rf is risk-free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A or...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR=...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR= , where R and o are the asset return and volatility (standard deviation of returns) respectively, and Rf is risk-free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A...
An analyst gathered the following information about a portfolio's performance over the past ten years: Mean...
An analyst gathered the following information about a portfolio's performance over the past ten years: Mean annual return: 11.8% Standard deviation of annual returns: 15.7% Portfolio Beta:1.2 If the mean return on the risk-free asset over the same period was 5.0%, the Sharpe ratio for the portfolio is closest to: Sharpe ratio A 0.23 B 0.36 C 0.43
A portfolio produces the following returns in years 1-5: Year Return (%) Year Return (%) 1...
A portfolio produces the following returns in years 1-5: Year Return (%) Year Return (%) 1 5 2 -1 3 -9 4 1 5 3 What is the Sharpe ratio of this portfolio, if the average risk-free rate over the same time period was 3%? Enter answer accurate to 2 decimal places. Please explain each step and do it on the excel.
A portfolio produces the following returns in years 1-5: Year Return (%) 1 0 2 0...
A portfolio produces the following returns in years 1-5: Year Return (%) 1 0 2 0 3 7 4 0 5 8 What is the Sharpe ratio of this portfolio, if the average risk free rate over the same time period was 2%? Enter answer accurate to 2 decimal places.
A portfolio produces the following returns in years 1-5: Year Return (%) 1 4 2 -5...
A portfolio produces the following returns in years 1-5: Year Return (%) 1 4 2 -5 3 4 4 8 5 -1 What is the Sharpe ratio of this portfolio, if the average risk free rate over the same time period was 3%? Enter answer accurate to 2 decimal places.
Q7-Consider the following combination of expected return and risk for various portfolios (named A-H) on the...
Q7-Consider the following combination of expected return and risk for various portfolios (named A-H) on the risk-return diagram. Assume a risk-free rate of 12% where one may borrow or lend at this rate. Expected Return (%) Risk (%) A 10 23 B 12.5 21 C D E F G H 15 16 17 18 18 20 25 29 29 32 35 45 Sharpe Ratio 1. Which of the above portfolios has the highest Sharpe ratio? (Must express in percentage) (5pts.)...
5. Over the last twenty years, the average return and standard deviation of returns of large...
5. Over the last twenty years, the average return and standard deviation of returns of large cap value stocks are 8.5% and 15.2%, and the average return and standard deviation of returns of fixed income portfolio are 5.3% and 3.4%. Suppose that over the next year the expected returns and risks of the two asset classes will remain the same as what happened in the last twenty years. Further assume that you can invest in a riskless asset with 2%...
13) An important measure of asset performance is called Sharpe ratio which is defined as , where and are the asset return and volatility (standard deviation of returns) respectively, and is risk- free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A or B) provides...
6) Over a 25-year period an asset had an arithmetic return of 13.1 percent and a geometric return of 12.6 percent. Using Blume's formula, what is your best estimate of the future annual returns over the next 10 years? A) 11.84 percent B) 13.04 percent C) 12.46 percent D) 11.18 percent E) 12.91 percent 6 7) Which one of the following statements is correct based on the period 1926-2016? A) The standard deviation of the annual rate of inflation was...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR=***, where R and o are the asset return and volatility (standard deviation of returns) respectively, and Rf is risk-free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A or...
13) An important measure of asset performance is called Sharpe ratio which is defined as SR= , where R and o are the asset return and volatility (standard deviation of returns) respectively, and Rf is risk-free return. Asset A has a return of 20% in upside state with probability of 0.4 and -10% in downside state with probability of 0.6 Asset B offers a 1.5% return with a volatility of 10%. Given a risk-free rate of 1%, which asset (A...
Q7-Consider the following combination of expected return and risk for various portfolios (named A-H) on the risk-return diagram. Assume a risk-free rate of 12% where one may borrow or lend at this rate. Expected Return (%) Risk (%) A 10 23 B 12.5 21 C D E F G H 15 16 17 18 18 20 25 29 29 32 35 45 Sharpe Ratio 1. Which of the above portfolios has the highest Sharpe ratio? (Must express in percentage) (5pts.)...
5. Over the last twenty years, the average return and standard deviation of returns of large cap value stocks are 8.5% and 15.2%, and the average return and standard deviation of returns of fixed income portfolio are 5.3% and 3.4%. Suppose that over the next year the expected returns and risks of the two asset classes will remain the same as what happened in the last twenty years. Further assume that you can invest in a riskless asset with 2%...
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