Your client would like to invest $10,000 in two risky assets A and B where Stock...
Your client would like to invest $10,000 in two risky assets A and B where
Stock A has an expected return of 4% and standard deviation of 10%
Stock B has an expected return of 6% and standard deviation of 20%
correlation (A,B)=0.5
Her utility function is U(μ, σ) = μ − ασ2, where her risk aversion is 3. How much should you invest in stock A and B so that she can receive the greatest utility?
Homework Answers
Portfolio return is M = w*4%+(1-w)*6%
Portfolio SD, S= ((w*10%)^2+((1-w)*20%)^2+2*w*(1-w)*10%*20%*0.5)^.5
Utility = M - 3*S^2
Then we use Excel solver to maximize utility
Add Answer to:
Your client would like to invest $10,000 in two risky assets A
and B where
Stock...
The universe of available securities includes two risky stocks A and B, and a risk-free asset....
The universe of available securities includes two risky stocks A and B, and a risk-free asset. The data for the universe are as follows: Assets Expected Return Standard Deviation Stock A 6% 25% Stock B 12% 42% Risk free 5% 0 The correlation coefficient between A and B is -0.2. The investor maximizes a utility function U=E(r)−σ2 (i.e. she has a coefficient of risk aversion equal to 2). Assume that to maximize his utility when there is no available risk-free...
Your client has $102,000 invested in stock A. She would like to build a two-stock portfolio...
Your client has $102,000 invested in stock A. She would like to build a two-stock portfolio by investing another $102,000 in either stock B or C. She wants a portfolio with an expected return of at least 15.5% and as low a risk as possible, but the standard deviation must be no more than 40%. What do you advise her to do, and what will be the portfolio expected return and standard deviation? Expected Return Standard Deviation Correlation with A...
Your client has $96,000 invested in stock A. She would like to build a two-stock portfolio...
Your client has $96,000 invested in stock A. She would like to build a two-stock portfolio by investing another $96,000 in either stock B or C. She wants a portfolio with an expected return of at least 15.5% and as low a risk as possible, but the standard deviation must be no more than 40%. What do you advise her to do, and what will be the portfolio expected return and standard deviation? A Expected Return 17% 14% 14% Standard...
Your client has $102.000 invested in stock A She would like to build a two-stock portfolio...
Your client has $102.000 invested in stock A She would like to build a two-stock portfolio by investing another $102,000 in other lock Bor C She wants a portfolio with an expected return of at least 14.0% and as low a risk as possible, but the standard deviation must be no more than 40% What do you advise her lo do, and what will be the portfolio expected return and standard deviation? Expected Return Standard Deviation Correlation with A 50%...
Mary has access to risky stocks A and B. But she has no access to risk-free...
Mary has access to risky stocks A and B. But she has no access to risk-free T-bills. The two assets have the following characteristics: Stock A: Expected return= 12.5% per annum, Standard deviation=14% per annum Stock B: Expected return = 5% per annum. Standard deviation=8% per annum The correlation coefficient between retum on stock A and return on stock B is 0.10 Mary's utility function U = E(R)- Ao and her coefficient of risk aversion is equal to 3 a)...
Mary has access to risky stocks A and B. But she has no access to risk-free...
Mary has access to risky stocks A and B. But she has no access to risk-free T-bills. The two assets have the following characteristics: Stock A: Expected return= 12.5% per annum, Standard deviation=14% per annum Stock B: Expected return = 5% per annum. Standard deviation=8% per annum The correlation coefficient between retum on stock A and return on stock B is 0.10 Mary's utility function U = E(R)- Ao and her coefficient of risk aversion is equal to 3 a)...
Your client has $102.000 invested in stock A She would like to budalwo-stock portfolio by investing...
Your client has $102.000 invested in stock A She would like to budalwo-stock portfolio by investing another $102.000 in the risk as possible, but the standard deviation must be no more than 40% What do you advise her to do, and what will be the port c 140 and as low or. She was a portfolio with an expected return of expected return and standard deviation? Standard Deviation Expected Return 16% Correlation with A 100 50 12% 40 0.25 The...
Your client has $ 97 comma 000$97,000 invested in stock A. She would like to build...
Your client has $ 97 comma 000$97,000 invested in stock A. She would like to build a two-stock portfolio by investing another $ 97 comma 000$97,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.5 %14.5% and as low a risk as possible, but the standard deviation must be no more than 40%. What do you advise her to do, and what will be the portfolio expected return and standard deviation?...
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...
(Computing the standard deviation for a portfolio of two risky investments Mary Gulo recently graded from...
(Computing the standard deviation for a portfolio of two risky investments Mary Gulo recently graded from Nichols State Unversity and is a s to begin investing her meget vigs as a way of ww what she has learned in business School Specifically, she is evaluating an investment in a pontono comprised of two firms common stock. She has collected the flowing information about the common stock of Fm Aandom BBW and standard deviation in portfolio a Mary invests at the...
Your client has $102,000 invested in stock A. She would like to build a two-stock portfolio by investing another $102,000 in either stock B or C. She wants a portfolio with an expected return of at least 15.5% and as low a risk as possible, but the standard deviation must be no more than 40%. What do you advise her to do, and what will be the portfolio expected return and standard deviation? Expected Return Standard Deviation Correlation with A...
Your client has $96,000 invested in stock A. She would like to build a two-stock portfolio by investing another $96,000 in either stock B or C. She wants a portfolio with an expected return of at least 15.5% and as low a risk as possible, but the standard deviation must be no more than 40%. What do you advise her to do, and what will be the portfolio expected return and standard deviation? A Expected Return 17% 14% 14% Standard...
Your client has $102.000 invested in stock A She would like to build a two-stock portfolio by investing another $102,000 in other lock Bor C She wants a portfolio with an expected return of at least 14.0% and as low a risk as possible, but the standard deviation must be no more than 40% What do you advise her lo do, and what will be the portfolio expected return and standard deviation? Expected Return Standard Deviation Correlation with A 50%...
Mary has access to risky stocks A and B. But she has no access to risk-free T-bills. The two assets have the following characteristics: Stock A: Expected return= 12.5% per annum, Standard deviation=14% per annum Stock B: Expected return = 5% per annum. Standard deviation=8% per annum The correlation coefficient between retum on stock A and return on stock B is 0.10 Mary's utility function U = E(R)- Ao and her coefficient of risk aversion is equal to 3 a)...
Mary has access to risky stocks A and B. But she has no access to risk-free T-bills. The two assets have the following characteristics: Stock A: Expected return= 12.5% per annum, Standard deviation=14% per annum Stock B: Expected return = 5% per annum. Standard deviation=8% per annum The correlation coefficient between retum on stock A and return on stock B is 0.10 Mary's utility function U = E(R)- Ao and her coefficient of risk aversion is equal to 3 a)...
Your client has $102.000 invested in stock A She would like to budalwo-stock portfolio by investing another $102.000 in the risk as possible, but the standard deviation must be no more than 40% What do you advise her to do, and what will be the port c 140 and as low or. She was a portfolio with an expected return of expected return and standard deviation? Standard Deviation Expected Return 16% Correlation with A 100 50 12% 40 0.25 The...
(Computing the standard deviation for a portfolio of two risky investments Mary Gulo recently graded from Nichols State Unversity and is a s to begin investing her meget vigs as a way of ww what she has learned in business School Specifically, she is evaluating an investment in a pontono comprised of two firms common stock. She has collected the flowing information about the common stock of Fm Aandom BBW and standard deviation in portfolio a Mary invests at the...
Most questions answered within 3 hours.
-
kmalloc()
Can be used by regular processes as a faster, lower-level
version of malloc
Allocates memory...
asked 1 minute ago -
Suppose a distant world with surface gravity of 6.88 m/s2 has an
atmospheric pressure of 8.12...
asked 3 minutes ago -
A mixture contains 5.432 g of
sand and 2.521 g of salt. What is the percentage...
asked 8 minutes ago -
A 8.62 -m ladder with a mass of 21.1 kg lies flat on the ground.
A...
asked 7 minutes ago -
What problem would arise from this vanadium-based treatment over
the course of a lifetime in diabetes
asked 6 minutes ago -
Homework: Create a Class.... from scratch
Design , implement and test a class that can be...
asked 22 minutes ago -
A project has a service life of five years with the initial
investment outlay of $200,000....
asked 18 minutes ago -
Employee develop involves longer term training and opportunities
that while not immediately needed on a current...
asked 18 minutes ago -
Why is the reticulum the affected compartment of the
stomach?
Group of answer choices
It has...
asked 20 minutes ago -
(Print distinct numbers) C++
Write a program that reads in 10 numbers and displays distinct
numbers...
asked 20 minutes ago -
A 3.0275 g sample of KHP (a primary standard, 1:1 acid:base,
FM=204.23 g/mol) is titrated with...
asked 26 minutes ago -
1. You need to make an aqueous solution of
0.165 M barium acetate for an
experiment...
asked 26 minutes ago