ZuoTi.Pro
Question

Investors can choose to invest in any combination of portfolio A, portfolio B, and Treasury bills....

Investors can choose to invest in any combination of portfolio A, portfolio B, and Treasury bills. Portfolio A has an expected return of 15% and a standard deviation of 36%. Portfolio B has an expected return of 10% and a standard deviation of 22%. Treasury bills return 3%. The correlation between portfolio A and B is 0.

What risky portfolio would any investor choose to combine with the risk-free asset? What are the weights on portfolio A and B in that risky portfolio?

Then of the portfolio that is created what is the Standard deviation and expected return?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

­

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

WEIGHT OF PORTFOLIO A = 39.03%

WEIGHT OF PORTFOLIO B = 60.97%

EXPECTED RETURN = 11.95%

STANDARD DEVIATION = 19.43%® v a 1x 23 ENG 11:55 16-04-2020_ ... o X B1 X for C A B D E F G H I I J K. L M N O A 1 optimal risky portfolio E(rs) = ErB

6 و 7 O | , x E ENG - ص 16-04-2020 | ه ... X 141 : x / | O - اما A B C D E F G H I J K L M N return on portfolio : 22 e ( P (

0 0
Add a comment
Know the answer?
Add Answer to:
Investors can choose to invest in any combination of portfolio A, portfolio B, and Treasury bills....
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Tom has $10,000. He can invest the money in (1) a corporate bond, (2) a stock,...

    Tom has $10,000. He can invest the money in (1) a corporate bond, (2) a stock, and (3) the risk-free T-bill. The table below provides these assets’ expected returns and standard deviations: Bond (D) Stock (E) T-Bill (F) Expected Return 5% 10% 2% Standard Deviation 10% 20% 0 The coefficient of correlation between the corporate bond and the stock (ρDE) is 30%. Tom has a risk aversion coefficient of A=5. To construct the optimal portfolio with two risky assets and...

  • 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...

  • You have $100,000 that you want to invest in a risky asset portfolio; M. Portfolio M...

    You have $100,000 that you want to invest in a risky asset portfolio; M. Portfolio M has an expected return of 20% and a standard deviation of 30%. You also want to borrow an extra $50,000 at a risk-free rate of 8% and invest in the risky portfolio. Calculate the expected return and standard deviation of this portfolio. What type of portfolio is this and what type of investors will invest in this portfolio?

  • Problem 2 (15 points) You invest $1,000 in a complete portfolio. The complete portfolio is composed...

    Problem 2 (15 points) You invest $1,000 in a complete portfolio. The complete portfolio is composed of a risky portfolio with an expected rate of return of 16% and a standard deviation of 20% and a treasury bill with a rate of return of 5%. a) what percentage of your complete portfolio should be invested in the risky portfolio il you want your complete portfolio to have a standard deviation of 9%? b) The slope of the capital allocation line...

  • You invest $100 in a complete portfolio. The complete portfolio is composed of a risky asset...

    You invest $100 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 12% and a standard deviation of 10% and a treasury bill with a rate of return of 5%. __________ of your complete portfolio should be invested in the risk-free asset if you want your complete portfolio to have a standard deviation of 9%.

  • Question 1: Suppose there are two risky assets, A and B. You collect the following data...

    Question 1: Suppose there are two risky assets, A and B. You collect the following data on probabilities of different states happening and the returns of the two risky assets in different states: State Probability Return Asset A Return Asset B State 10.3 7% 14% State 20.4 6% -4% State 30.3 -8% 8% The risk-free rate of return is 2%. (a) Calculate expected returns, variances, standard deviations, covariance, and correlation of returns of the two risky assets. (b) There are...

  • You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury...

    You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% 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 0.12 and variance of 0.0081, and Y has an expected rate of return of 0.09 and a variance of 0.0016. The coefficient of correlation, rho,...

  • An investor can design a risky portfolio based on two stocks, A and B. Stock A...

    An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 45% and a standard deviation of return of 9%. Stock B has an expected return of 15% and a standard deviation of return of 2%.The correlation coefficient between the returns of A and B is 0.0025. The risk-free rate of return is 2%. The standard deviation of return on the minimum variance portfolio is _________.

  • An investor can design a risky portfolio based on two stocks, A and B. Stock A...

    An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 14% and a standard deviation of return of 24.0%. Stock B has an expected return of 10% and a standard deviation of return of 4%. The correlation coefficient between the returns of A and B is 0.50. The risk-free rate of return is 8%. The proportion of the optimal risky portfolio that should be invested in stock A is...

  • 3) Assume that you manage a risky portfolio with an expected rate of return of 14%...

    3) Assume that you manage a risky portfolio with an expected rate of return of 14% and standard deviation of 19%. The risk-free rate rate on a Treasury-bill is 6%. a. Your client chooses to invest 60% of a portfolio in your fund and 40% in a risk-free T-bill money market fund. What is the expected return and standard deviation of your client's portfolio? b. Suppose another investor decides to invest in your risky portfolio a proportion (w) of his...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT