Can any investment option have a low Sharpe ratio but still be in a portfolio on...
Can any investment option have a low Sharpe ratio but still be in a portfolio on the efficient frontier?
Why or why not?
Homework Answers
Yes, It is possible that an investment option may have a lower Sharpe Ratio and still be part of a portfolio on the efficient frontier.
A higher sharpe Ratio means less volitility in stock but sharpe ratio is not the correct way to judge a portfolio. The Sharpe Ratio arbitrarily uses 1-year standard deviation. For long term investors, one year is a short term measure of volatility that may be inappropriate.
Also investments with High risk gives you high returns sometimes. So many investors keep investment with low Sharpe ratio in their portfolio.
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Can any investment option have a low Sharpe ratio but still be
in a portfolio on...
Investing all your wealth in the portfolio with the highest Sharpe Ratio is the strategy that...
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. II. Yes No Why?
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...
7. Sharpe ratio will be higher if the expected return of the portfolio is higher and/or...
7. Sharpe ratio will be higher if the expected return of the portfolio is higher and/or standard deviation of the portfolio is lower. a. True b. False
5. (Risk and return of option; Sharpe ratio) James would like to speculate on a possible...
5. (Risk and return of option; Sharpe ratio) James would like to speculate on a possible rise in the stock price of QQQ (an exchange traded fund launched and managed by PowerShares Capital Management LLC). The current stock price of QQQ is $82. James expects that in one year the stock price of QQQ will be either $110 (up move; 60% chance) or $60 (down move; 40% chance). The exercise price of one-year European call option of QQQ=$80 and risk-free...
Could portfolio A show a higher Sharpe ratio than that of B and at the same...
Could portfolio A show a higher Sharpe ratio than that of B and at the same time a lower M2 measure? Explain.
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?
Consider a portfolio investment consisting of 40% invested in MTN, 60 Consider a portfolio investment consisting...
Consider a portfolio investment consisting of 40% invested in MTN, 60 Consider a portfolio investment consisting of 40% invested in MTN, 60% invested in Multichoice Expected return; MTN = -0.0020 Multichoice= 0.0033 Variance; MTN = 0.000447561 Multichoice = 0.001247259 Standard deviation; MTN= 0.0212 Multichoice= 0.0353 3.1 Calculate the expected return of the portfolio 3.2 Calculate the covariance of the portfolio 3.3 Calculate the variance of the portfolio and standard deviation of the portfolio 3.4 Given that the risk free rate...
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...
The Sharpe ratio measure on a portfolio which earns 12 percent, with a standard deviation of...
The Sharpe ratio measure on a portfolio which earns 12 percent, with a standard deviation of 30 percent and beta of 1.27 is: A. 0.40 B. 0.094 C. 0.508 D. There is not enough information. I am leaning towards not having enough information because the Sharpe's ratio also needs the average risk-free rate of return. Am I correct?
Suppose that youu currently have $250,000 invested in a portfolio with an expected return of 12%...
Suppose that youu currently have $250,000 invested in a portfolio with an expected return of 12% and a volatility of 10%. the efficient (tangent) portfolio has an expected return of 17% and a volatility of 12%. the risk-free rate of interest is 5%. the sharpe ratio for the efficient portfolio is closest to: a) 1,0 b) 1,4 c) 0,7 d) 1,2
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. II. Yes No Why?
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...
7. Sharpe ratio will be higher if the expected return of the portfolio is higher and/or standard deviation of the portfolio is lower. a. True b. False
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?
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