ZuoTi.Pro
Question

A person wants to invest $10,000 into stocks: a high tech company (T) with an expected...

A person wants to invest $10,000 into stocks: a high tech company (T) with an expected annual return of 12% and a risk index of 8; and a regulated power company (P) with an expected annual return of 6% and a risk index of 2. To limit risk, the combined portfolio risk must be no more than 6 and the proportion of investment in T must be less than 60%.

a) Formulate the Investment Portfolio problem with the requirement of investing up to $10,000, and solve it graphically.

please include constraints, corner points and feasible region.

b): Compute the increase in annual return if the total investment is increased by $1,000.

c) Compute the increase in annual return if the constraint of portfolio risk index is increased from 6 to 7.

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

Homework Answers

Answer #1

0 0
Add a comment
Know the answer?
Add Answer to:
A person wants to invest $10,000 into stocks: a high tech company (T) with an expected...
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

  • Marie has $10,000 to invest. She decided to borrow some funds at the risk-free rate of...

    Marie has $10,000 to invest. She decided to borrow some funds at the risk-free rate of 6 percent to increase her investment in a portfolio with an expected return of 25 percent and a standard deviation of 30 percent. What is the expected return and standard deviation for her portfolio if she borrowed 50 percent of the portfolio value? Expected Return? Standard Deviation?

  • Marie has $10,000 to invest. She decided to borrow some funds at the risk-free rate of...

    Marie has $10,000 to invest. She decided to borrow some funds at the risk-free rate of 6 percent to increase her investment in a portfolio with an expected return of 25 percent and a standard deviation of 30 percent. What is the expected return and standard deviation for her portfolio if she borrowed 50 percent of the portfolio value?

  • 4 Stocks below A В C Е 1 25 POINTS 2 You currently own the four...

    4 Stocks below A В C Е 1 25 POINTS 2 You currently own the four stocks below. 3 4 1. Please compute the portfolio beta and expected return. Put your final answers in the 5 provided green shaded cells. 6 2. Which of the stocks should you sell? Why? 7 10 11 3. Assume you sell the stock you mentioned in #2 above and invest the proceeds in an S&P 12 500 index fund. What will your new portfolio...

  • The following are estimates for two stocks. Firm-Specific Standard Deviation Stock A B Expected Return 108...

    The following are estimates for two stocks. Firm-Specific Standard Deviation Stock A B Expected Return 108 17 Beta 0.80 1.30 298 40 The market index has a standard deviation of 19% and the risk-free rate is 6%. a. What are the standard deviations of stocks A and B? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Stock A Stock B b. Suppose that we were to construct a portfolio with proportions: Stock A Stock B T-bills...

  • Suppose we have the following information about two stocks: Beta Expected Return 11% 6% 1.6 Stock...

    Suppose we have the following information about two stocks: Beta Expected Return 11% 6% 1.6 Stock 1 Stock 2 0.5 If the CAPM holds, what is the risk-free interest rate, the expected stock market return, and the market risk premium? (hint: Use CAPM equation for each separately; plug in known values and see if you can find unknown parameters through the two equations. Question #5 (30 points) Download monthly price data for Cigna (CI) and Amazon.com (MNZ) for the period...

  • TABLE 5.3 Risk and return of investments in major asset classes, 1927-2016 T-bills T-bonds Stocks Arithmetic...

    TABLE 5.3 Risk and return of investments in major asset classes, 1927-2016 T-bills T-bonds Stocks Arithmetic average Risk premium Standard deviation max min 3.42 N/A 3.14 14.71 -0.02 5.51 2.08 8.14 38.07 -8.47 11.91 8.48 19.99 56.38 -43.73 Using Table 5.3as your guide, what is your estimate of the expected annual HPR on the market index stock portfolio if the current risk free interest rate is 4.4%? (Round your answer to 2 decimal places.) Expected annual HPR

  • Investment Portfolio You are an investment manager for Simple Asset Management, a company that specializes in...

    Investment Portfolio You are an investment manager for Simple Asset Management, a company that specializes in developing simple investment portfolios consisting of no more than three assets such as stocks, bonds, etc., for investors who like to keep things simple. One of your more popular investments is called the All World Fund and is composed of global stocks with good dividend yields. A client is interested in constructing a portfolio that consists of the All World Fund and the Treasury...

  • Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of the portfolio. 4. Assume...

    Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of the portfolio. 4. Assume that the total market value of an initial portfolio is $300,000. Suppose that the owner of this portfolio wishes to decrease risk by reducing the allocation to the risky portfolio from y = 0.7 to y = 0.56. How do you reallocate your risky portfolio? 5. Which of the following factors reflect pure market risk for a given corporation? a. Increased short-term interest rates....

  • A pension fund manager is considering three mutual funds. The first is a stock fund the second is...

    A pension fund manager is considering three mutual funds. The first is a stock fund the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of th risky funds are The following data apply to Problems 8-12. Standard Deviation 32% 23 Expected Return 15% Stock fund (S Bond fund (B) The correlation between the fund returns is.15 8. Tabulate and draw...

  • The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 10...

    The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 10 % 0.70 28 % B 18 1.25 42 The market index has a standard deviation of 22% and the risk-free rate is 7%. a. What are the standard deviations of stocks A and B? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Suppose that we were to construct a portfolio with proportions: Stock A 0.35 Stock B 0.35 T-bills...

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