ZuoTi.Pro
Question

Investor A wants to maximize his expected return by investing some proportion in Stock Z which...

Investor A wants to maximize his expected return by investing some proportion in Stock Z which has expected rate of return of 18% and standard deviation of 25%. He invests remaining proportion in T-bills. Return of T-bill is 6.5%. The standard deviation on overall portfolio should not be more than 21%. The investment proportion in Stock Z and expected return on overall portfolio are: a) 16.00% and 16.16% respectively b) 84.00% and 16.16% respectively c) 84.00% and 15.12% respectively d) 16.00% and 15.12% respectively

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

Homework Answers

Answer #1

The investment proportion in Stock Z

=standard deviation max/ standard deviation of Z

=21%/25%
=84.00%

expected return on overall portfolio are

=84.00%*18%+(1-84.00%)*6.5%

=16.16%

so answer will be b) 84.00% and 16.16% respectively

the above is answer..

0 0
Add a comment
Know the answer?
Add Answer to:
Investor A wants to maximize his expected return by investing some proportion in Stock Z which...
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

  • An investor wants to form a two asset portfolio with proportion y of available funds invested...

    An investor wants to form a two asset portfolio with proportion y of available funds invested in a risky portfolio with an expected return of 11% and a standard deviation of 15% and the remaining proportion (1 - y) of available funds invested in treasury bills with a return of 1%, so that the standard deviation of the complete portfolio will not exceed 10%. a. What is the proportion y? b. What is the expected return for the complete portfolio?...

  • s presented with the two following stocks 17. The investor Stock A Stock B Expected Return...

    s presented with the two following stocks 17. The investor Stock A Stock B Expected Return Standard Deviation 30% 40% 60% 50% the portfolio that the expected return Assume that the correlation coefficient between the stocks is zero. What stock A invests 30% i A.20% B.37% 07a 18. The investor is presented with the two following stocks: Stock A Stock B Expected Return Standard Deviation 0% 40% 50% 60% Assume that the correlation coefficient between the stocks is zero. What...

  • You manage a risky portfolio that has an expected return of 9% and a standard deviation...

    You manage a risky portfolio that has an expected return of 9% and a standard deviation of returns of 12.5%. The T-bill rate is 3%. Your client wants to allocate her investment portfolio between your fund and T-bills to achieve an expected rate of return of 7%. What proportion of her portfolio should she allocate to the risky portfolio? What proportion to T-bills? What is the standard deviation of her portfolio? Another client wants to allocate his investment portfolio between...

  • Assume that you manage a risky portfolio with an expected rate of return of 17% and...

    Assume that you manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 27%. The T-bill rate is 7%. Your risky portfolio includes the following investments in the given proportions: Stock A 27% Stock B 33% Stock C 40% Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an...

  • Check Assume that you manage a risky portfolio with an expected rate of return of 15%...

    Check Assume that you manage a risky portfolio with an expected rate of return of 15% and a standard deviation of 31%. The T-bill rate is 5% Your risky portfolio includes the following investments in the given proportions: 125 points Stock A Stock 8 Stock C Your client decides to invest in your risky portfolio a proportion of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected...

  • 4 Assume that you manage a risky portfolio with an expected rate of return of 20%...

    4 Assume that you manage a risky portfolio with an expected rate of return of 20% and a standard deviation of 42. The T-bill rate is 4% Your risky portfolio includes the following investments in the given proportions: points 268 Stock Stock Skipped Your client decides to invest in your risky portfolio a proportion (1) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of...

  • You manage a risky portfolio with an expected rate of return of 18% and a standard...

    You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 36%. The T-bill rate is 6%. Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 279 358 388 Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 15%. a. What is the...

  • The investor is presented with the two following stocks: Expected Return Standard Deviation Stock A 10%...

    The investor is presented with the two following stocks: Expected Return Standard Deviation Stock A 10% 30% Stock B 20% 60% What is the expected return on the portfolio that invests 30% in stock A? A. 15% B. 17% C. 27% D. 23%

  • Assume that you manage a risky portfolio with an expected rate of return of 18% and...

    Assume that you manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 34%. The T-bill rate is 4%. Your client chooses to invest 85% of a portfolio in your fund and 15% in a T-bill money market fund. a. What is the expected return and standard deviation of your client's portfolio? (Round your answers to 2 decimal places.) Expected return % per year Standard deviation % per year b. Suppose your risky...

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

    Assume that you manage a risky portfolio with an expected rate of return of 14% and a standard deviation of 30%. The T-bill rate is 6%. Your risky portfolio includes the following investments in the given proportions: Stock A Stock B Stock C 24% 32 44 Your client decides to invest in your risky portfolio a proportion (1) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an...

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