Homework Answers
Since the derivation involves lots of symbols and notations, i am attaching a hand written solution.
Let's say we are trying to create a hedge for a portfolio of stocks that we own. In order to create this cross asset hedge, we go short on index futures contract. So our crossed hedged position is:
- Portfolio of stocks, P
- Short "h" number of Index Future Contracts. Since Index futures are future contracts on Index and index is representation of market, hence volatility in change in index future prices = volatility in market returns
Symbols and notations have usual meaning in the theory of finance.
Please see the attached pictures below one after the other.
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If you know the formula for correlation to be cov(portfolio,market) p om show that the minimum...
a. Compute the correlation between assets A and B if you know that the standard deviation...
a. Compute the correlation between assets A and B if you know that the standard deviation of B is 50% of the standard deviation of A and the covariance between the two assets is 0.5 times the variance of asset A. Correlation is 1 b. What is the risk (measured as the variance) of the portfolio created by investing 50% in asset A and 50% in asset B in the previous point? Assume that the variance of the asset A...
The risk-free rate is 0%. The market portfolio has an expected return of 20% and a volatility of 20%. You have $100 to invest. You decide to build a portfolio P which invests in both the risk-free investment and the market portfolio.
The risk-free rate is 0%. The market portfolio has an expected return of 20% and a volatility of 20%. You have $100 to invest. You decide to build a portfolio P which invests in both the risk-free investment and the market portfolio.a. How much should you invest in the market portfolio and the risk-free investment if you want portfolio P to have an expected return of 40%?b. How much should you invest in the market portfolio and the risk-free investment...
can you know how to do it please it is corporate finance u can do beta...
can you know how to do it please it is corporate finance
u
can do beta will cov over the protfolio of variance
A portfolio consists of two stocks, Stock A and Stock B. The volatility of Stock A is 0.5 and the volatility of Stock B is 0.25. The proportion of the portfolio's value that is represented by shares of Stock A is 0.3. The correlation of the returns of the two stocks is 0.6. Calculate the beta of...
How do you get this answer? Portfolio Weight 0.25 Correlation w Market Portfolio 0.7 0.6 0.5...
How do you get this
answer?
Portfolio Weight 0.25 Correlation w Market Portfolio 0.7 0.6 0.5 Volatility 14% 18% 15% Firm Taggart Transcontinental Wyatt Oi 0.35 0.40 Rearden Metal The volatility of the market portfolio is 10%, the expected return on the market is 12%, and the risk-free rate of interest is 4% The Sharpe Ratio for the market portfolio is closest to O A. 0.40 O B. 0.56 O C. 0.48 D. 0.80
Below are statistics for portfolio P and the market index. The data is 10-year data and...
Below are statistics for portfolio P and the market index. The data is 10-year data and the data are monthly. Total number of observations is 120. Performance Measurement No observations 120 Portfolio P S&P500 Expected Excess Return ? 1.00% Standard Deviation total 12.00% 5.00% Alpha 3.00% Beta 1.3000 Standard Deviation Residuals (error) 10.00% M-square ? General VaR ? Specific VaR ? Risk-free monthly basis 0.02% Making use of the index model, what is the expected excess return for portfolio P?...
You want to create a portfolio equally as risky as the market and you have $1,300,000...
You want to create a portfolio equally as risky as the market and you have $1,300,000 to invest. Given this information, fill in the rest of the following table: Shows all the step and formula. Don't round off until you get the answer. Asset Investment Beta Stock A 184000 0.81 Stock B 437000 1.22 Stock C 1.65 Risk-free asset
For this question, i have trouble doing the first one. Can you please explain how can i get the RATE OF RETURN FOR RF?...
For this question, i have trouble doing the first one. Can you
please explain how can i get the RATE OF RETURN FOR RF?
Thanks
X Yand Zare portfolios of securities. Data pertaining to these portfolios and the market portfolio are given in the following table: Std dev(R 0.28 Cov(Ri Rm Portfolio E(RD Beta P p.m X 0.015 Y 0.23 ? 0.17 1.5 0.92 0.048 0.34 ? M ? 0.10 2 0.02 Also Cov(Rs.Ry= 0.04 REQUIRED risk free Calculate the...
You have been provided the following data about the securities of three firms, the market portfolio, and the risk-free a...
You have been provided the following data about the securities
of three firms, the market portfolio, and the risk-free asset:
a.
Fill in the missing values in the table.
* With the market portfolio
b-1.
What is the expected return of Firm A?
b-2.
What is the expected return of Firm B?
b-3.
What is the expected return of Firm C?
Security Expected Return Standard Deviation Correlation* Beta 0.21 Firm A 0.120 0.96 Firm B 0.130 040 1.51 Firm C...
9. (Market portfolio, CML) In the Golkoland stock market, there are only two listed stocks, Xirkind...
9. (Market portfolio, CML) In the Golkoland stock market, there are only two listed stocks, Xirkind and Yirkind. The risk-free rate of return in Golkoland is 5%, and the portfolio of Xirkind and Yirkind stocks which has the highest Sharpe ratio is given below: A C 3 Average return 4 Variance of returns 5 Standard deviation 6 Covariance of returns 7 Correlation 8 Risk-free return B DE Xirkind Yirkind 19.84% 15.38% 0.1575 0.1378 39.68% 37.12% <-- SQRT(C4)! -0.0110 -0.0747 <--...
Suppose you manage an equity portfolio. You are concerned that equities, as an asset class, are...
Suppose you manage an equity portfolio. You are concerned that equities, as an asset class, are temporarily overvalued, so you implement a hedge, utilizing the S&P 500 index futures contract. Other important information is as follows: Your equity portfolio is $5M and has a beta equal to 1.5. The riskless rate is 4% per annum. The S&P 500 index is currently equal to 1,000 and has a dividend yield of 1% per annum. The S&P 500 index futures price is...
can you know how to do it please it is corporate finance
u
can do beta will cov over the protfolio of variance
A portfolio consists of two stocks, Stock A and Stock B. The volatility of Stock A is 0.5 and the volatility of Stock B is 0.25. The proportion of the portfolio's value that is represented by shares of Stock A is 0.3. The correlation of the returns of the two stocks is 0.6. Calculate the beta of...
How do you get this
answer?
Portfolio Weight 0.25 Correlation w Market Portfolio 0.7 0.6 0.5 Volatility 14% 18% 15% Firm Taggart Transcontinental Wyatt Oi 0.35 0.40 Rearden Metal The volatility of the market portfolio is 10%, the expected return on the market is 12%, and the risk-free rate of interest is 4% The Sharpe Ratio for the market portfolio is closest to O A. 0.40 O B. 0.56 O C. 0.48 D. 0.80
For this question, i have trouble doing the first one. Can you
please explain how can i get the RATE OF RETURN FOR RF?
Thanks
X Yand Zare portfolios of securities. Data pertaining to these portfolios and the market portfolio are given in the following table: Std dev(R 0.28 Cov(Ri Rm Portfolio E(RD Beta P p.m X 0.015 Y 0.23 ? 0.17 1.5 0.92 0.048 0.34 ? M ? 0.10 2 0.02 Also Cov(Rs.Ry= 0.04 REQUIRED risk free Calculate the...
You have been provided the following data about the securities
of three firms, the market portfolio, and the risk-free asset:
a.
Fill in the missing values in the table.
* With the market portfolio
b-1.
What is the expected return of Firm A?
b-2.
What is the expected return of Firm B?
b-3.
What is the expected return of Firm C?
Security Expected Return Standard Deviation Correlation* Beta 0.21 Firm A 0.120 0.96 Firm B 0.130 040 1.51 Firm C...
9. (Market portfolio, CML) In the Golkoland stock market, there are only two listed stocks, Xirkind and Yirkind. The risk-free rate of return in Golkoland is 5%, and the portfolio of Xirkind and Yirkind stocks which has the highest Sharpe ratio is given below: A C 3 Average return 4 Variance of returns 5 Standard deviation 6 Covariance of returns 7 Correlation 8 Risk-free return B DE Xirkind Yirkind 19.84% 15.38% 0.1575 0.1378 39.68% 37.12% <-- SQRT(C4)! -0.0110 -0.0747 <--...
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