Homework Answers
YES. SHARPE RATIO CAN MEASURE THE RISK RETURNS OF THE MUTUAL FUND.HIGHER THE SHARPE RATIO, BETTER THE RISK ADJUSTED PERFORMANCE. SO ITS A RIGHT DECISION TO INVEST THE PORTFOLIO HAVING HIGH SHARPE RATIO TO MEET YOUR GOALS
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Investing all your wealth in the portfolio with the highest Sharpe Ratio is the strategy that...
Question 8 [2 points) Investing all your wealth in the portfolio with the highest Sharpe Ratio...
Question 8 [2 points) Investing all your wealth in the portfolio with the highest Sharpe Ratio is the strategy that will give you the best chance of meeting your goals. I. Yes II. No Why?
Assume you are considering investing your personal portfolio in only two possible risky assets: 60% invested...
Assume you are considering investing your personal portfolio in only two possible risky assets: 60% invested in Asset Y and the rest in Asset Z. The characteristics of these two risky assets are as follows: Asset Y has an Expected Return of 12% and a standard deviation of 15% Asset Z has an Expected Return of 9% and a standard deviation of 12% Correlation between the returns of Asset Y and Asset Z is 0.20 Find the Expected Return of...
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...
2. You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of...
2. You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 2% and a risky portfolio, P constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 40% and 60%, respectively. X has an expected rate of return of 0.10 and variance of 0.0081, and Y has an expected rate of return of 0.06 and a variance of 0.0036. The coefficient of correlation,...
Er (%) 0.2 Consider the CAPM framework. Suppose that you currently have 40% of your wealth...
Er (%) 0.2 Consider the CAPM framework. Suppose that you currently have 40% of your wealth in Treasury Bills, risk-free, and 60% in the four assets below Asset i Bi Wi i = 1 8.5 0.2 0.1 i = 2 13.1 0.8 0.1 i = 3 16.6 1.2 0.2 i = 4 18.7 1.4 Let the four assets be traded in a market M with Erm = 15% and let the risk-free rate be rf = 4%, answer the following...
An investor currently has all of his wealth in Treasury bills. He is considering investing one-third...
An investor currently has all of his wealth in Treasury bills. He is considering investing one-third of his funds in General Electric, whose beta is 1.5, with the remainder left in Treasury bills. The expected risk-free rate (Treasury bills) is 4 percent and the market risk premium is 5.1 percent. Determine the beta and the expected return on the proposed portfolio. Round your answers to two decimal places. Portfolio's Beta: Portfolio's Expected Return: %
29) Which of the following statements is FALSE? A) The Sharpe ratio of the portfolio tells us how much our expected...
29) Which of the following statements is FALSE? A) The Sharpe ratio of the portfolio tells us how much our expected retun will increase for a given increase in volatility B) We should continue to trade securities until the expected r return of each security equals its required return. Q) The required return is the expected return that is necessary to compensate for the risk that an investment will contribute to the portfolio. D) If security is required retun exceeds...
Show all of your work and answer all questions in Excel. The questions should look familiar....
Show all of your work and answer all questions in Excel. The questions should look familiar. Each question is 15 points. Historic Returns X returns Bret 1. Draw the opportunity set of securities X and B. Be sure to label the minimum-variance portfolio, the optimal portfolio, and the capital allocation line B returns T-Bills 4.15 -7 37 2. Find the optimal risky portfolio (O), its expected return, standard deviation, and Sharpe ratio. Compare with the Sharpe ratios of X and...
5. Consider two perfectly negatively correlated risky securities A and B. Your portfolio is currently weighted...
5. Consider two perfectly negatively correlated risky securities A and B. Your portfolio is currently weighted with 50% in A and 50% in B. A has an expected rate of return of 10% and a standard deviation of 16%. B has an expected rate of return of 8% and a standard deviation of 12%. The risk-free rate is 3%. (a) (3 points) What are the variance and return for your portfolio? (b) (4 points) What weights would give you the...
dav/pic-1510314-ut-content-rid-148748111/courses/D2930-10315/HW1%283%29.pdf 26. You are a portfolio manager who uses options positions to customize the risk profile...
dav/pic-1510314-ut-content-rid-148748111/courses/D2930-10315/HW1%283%29.pdf 26. You are a portfolio manager who uses options positions to customize the risk profile of your clients. In cach case, what strategy is best given your client's objective? a. Choose one of the following strategies and explain briefly Performance to date: up 16% Client objective: eam at least 15% Your scenario: good chance of large gains or large losses between now and end of year Strategies i. Long straddle ii. Long bullish spread iii. Short straddle b. Choose...
Question 8 [2 points) Investing all your wealth in the portfolio with the highest Sharpe Ratio is the strategy that will give you the best chance of meeting your goals. I. Yes II. No Why?
2. You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 2% and a risky portfolio, P constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 40% and 60%, respectively. X has an expected rate of return of 0.10 and variance of 0.0081, and Y has an expected rate of return of 0.06 and a variance of 0.0036. The coefficient of correlation,...
Er (%) 0.2 Consider the CAPM framework. Suppose that you currently have 40% of your wealth in Treasury Bills, risk-free, and 60% in the four assets below Asset i Bi Wi i = 1 8.5 0.2 0.1 i = 2 13.1 0.8 0.1 i = 3 16.6 1.2 0.2 i = 4 18.7 1.4 Let the four assets be traded in a market M with Erm = 15% and let the risk-free rate be rf = 4%, answer the following...
29) Which of the following statements is FALSE? A) The Sharpe ratio of the portfolio tells us how much our expected retun will increase for a given increase in volatility B) We should continue to trade securities until the expected r return of each security equals its required return. Q) The required return is the expected return that is necessary to compensate for the risk that an investment will contribute to the portfolio. D) If security is required retun exceeds...
Show all of your work and answer all questions in Excel. The questions should look familiar. Each question is 15 points. Historic Returns X returns Bret 1. Draw the opportunity set of securities X and B. Be sure to label the minimum-variance portfolio, the optimal portfolio, and the capital allocation line B returns T-Bills 4.15 -7 37 2. Find the optimal risky portfolio (O), its expected return, standard deviation, and Sharpe ratio. Compare with the Sharpe ratios of X and...
5. Consider two perfectly negatively correlated risky securities A and B. Your portfolio is currently weighted with 50% in A and 50% in B. A has an expected rate of return of 10% and a standard deviation of 16%. B has an expected rate of return of 8% and a standard deviation of 12%. The risk-free rate is 3%. (a) (3 points) What are the variance and return for your portfolio? (b) (4 points) What weights would give you the...
dav/pic-1510314-ut-content-rid-148748111/courses/D2930-10315/HW1%283%29.pdf 26. You are a portfolio manager who uses options positions to customize the risk profile of your clients. In cach case, what strategy is best given your client's objective? a. Choose one of the following strategies and explain briefly Performance to date: up 16% Client objective: eam at least 15% Your scenario: good chance of large gains or large losses between now and end of year Strategies i. Long straddle ii. Long bullish spread iii. Short straddle b. Choose...
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