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4. Mathematically show how the variance of a two-asset portfolio changes if the two assets are...
Q15. Portfolio Choice (5 Points) In a two-assets allocation problem, what's the portfolio volatility if the...
Q15. Portfolio Choice (5 Points) In a two-assets allocation problem, what's the portfolio volatility if the return correlation between asset 1 and asset 2 is -1 (perfectly negatively correlated), 0 or 1 (perfectly positively correlated)? Q16. Describe some of the ways the CAPM is applied in practice (5 Points)
In a portfolio that contains two assets it is possible that there is no benefit to...
In a portfolio that contains two assets it is possible that there is no benefit to diversification from moving from a single asset to two assets. Why can this happen?Select one: a. It happens if returns on the assets in the portfolio are perfectly positively correlated. b. It happens if each of the assets is a common share. c. It happens if returns on one asset are negatively correlated with returns on the other asset. d. The statement is incorrect...
Assume you are considering a portfolio containing two assets, L and M. Asset L will represent...
Assume you are considering a portfolio containing two assets, L and M. Asset L will represent 36% of the dollar value of the portfolio, and asset M will account for the other 64%. The projected returns over the next six years, 2018–2023, for each of these assets are summarized in the following table. *huge thumbs up for correct answers* Projected Return (%) Year Asset L Asset M 2018 15% 21% 2019 14% 17% 2020 16% 16% 2021 16% 14% 2022...
Assume you are considering a portfolio containing two assets, L and M. Asset L will represent...
Assume you are considering a portfolio containing two assets, L
and M. Asset L will represent 39 % of the dollar value of the
portfolio, and asset M will account for the other 61 %. The
projected returns over the next 6 years, 2018-2023, for each of
these assets are summarized in the following table:
LOADING....
a. Calculate the projected portfolio return, r over p, for
each of the 6 years.
b. Calculate the average expected portfolio return, r over...
Assume you are considering a portfolio containing Asset 1 and Asset 2. Asset 1 will represent...
Assume you are considering a portfolio containing Asset 1 and Asset 2. Asset 1 will represent 63% of the dollar value of the portfolio, and Asset 2 will account for the other 37%. The projected returns over t6 years, 2021-2026, for each of these assets are summarized in the following table: a. Calculate the projected portfolio retur, fp, for each of the 6 years. Data Table - X b. Calculate the average expected portfolio return, fp, over the 6-year period....
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...
Consider two assets A and B. Each has the same expected return. Suppose that the variance...
Consider two assets A and B. Each has the same expected return. Suppose that the variance of the return on A is 49 and the variance of the return on asset B is 100. The returns on the two assets are correlated with a correlation coefficient of .4. If an investor wants to hold a portfolio of the two assets that has the smallest variance of its return, what fraction of the investor’s wealth should be in asset A? How...
Consider a portfolio consisting of the following two risky assets. Asset i Hi, Return on Asset...
Consider a portfolio consisting of the following two risky assets. Asset i Hi, Return on Asset i 7% 7% 0, Risk in Asset i 18% 14% The coefficient of correlation between the returns is p = -100%. (a) State the expected return and associated risk (as measured by the standard deviation) in terms of w if w is the weight allocation of Asset 1 in the portfolio. Hry (w) = 0.07 Or, (w) = sqrt(0.0632w^2-0.C (b) Suppose that the portfolio...
Assume you wish to evaluate the risk and return behaviors associated with various combinations of two stocks, Alpha Sof...
Assume you wish to evaluate the risk and return behaviors associated with various combinations of two stocks, Alpha Software and Beta Electronics, under three possible degrees of correlation: perfect positive, uncorrelated, and perfect negative. The average return and standard deviation for each stock appears here: Asset Average Return,overbar r Risk (Standard Deviation), s Alpha 5.1% 30.3% Beta 11.2% 50.5% a. If the returns of assets Alpha and Beta are perfectly positively correlated (correlation coefficient equals plus 1),...
There are only two risky assets (stocks) A and B in the market. Asset A: Mean...
There are only two risky assets (stocks) A and B in the market. Asset A: Mean = 20% Standard Deviation = 10% Asset B: Mean = 10% Standard Deviation = 5% Returns on Assets have zero correlation. A.Assume that there is no risk-free asset. (i)Plot (sketch) the efficiency frontier (the investment opportunity set). (ii)What is the expected return and the standard deviation of the minimum-variance-portfolio? (iii)An investor would like to construct a portfolio that has a standard deviation of 8%....
Q15. Portfolio Choice (5 Points) In a two-assets allocation problem, what's the portfolio volatility if the return correlation between asset 1 and asset 2 is -1 (perfectly negatively correlated), 0 or 1 (perfectly positively correlated)? Q16. Describe some of the ways the CAPM is applied in practice (5 Points)
Assume you are considering a portfolio containing two assets, L
and M. Asset L will represent 39 % of the dollar value of the
portfolio, and asset M will account for the other 61 %. The
projected returns over the next 6 years, 2018-2023, for each of
these assets are summarized in the following table:
LOADING....
a. Calculate the projected portfolio return, r over p, for
each of the 6 years.
b. Calculate the average expected portfolio return, r over...
Assume you are considering a portfolio containing Asset 1 and Asset 2. Asset 1 will represent 63% of the dollar value of the portfolio, and Asset 2 will account for the other 37%. The projected returns over t6 years, 2021-2026, for each of these assets are summarized in the following table: a. Calculate the projected portfolio retur, fp, for each of the 6 years. Data Table - X b. Calculate the average expected portfolio return, fp, over the 6-year period....
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...
Consider a portfolio consisting of the following two risky assets. Asset i Hi, Return on Asset i 7% 7% 0, Risk in Asset i 18% 14% The coefficient of correlation between the returns is p = -100%. (a) State the expected return and associated risk (as measured by the standard deviation) in terms of w if w is the weight allocation of Asset 1 in the portfolio. Hry (w) = 0.07 Or, (w) = sqrt(0.0632w^2-0.C (b) Suppose that the portfolio...
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