Homework Answers
| DEAR Value | = ($ Value of portfolio) x (2.33 x sm ) = $10m x (2.33 x .015) | ||||||
| = $10m x .03495 = $0.3495m or $349,500 | |||||||
| VAR | = $349,500 x Ö5 = $349,500 x 2.2361 = $781,505.76 | ||||||
Add Answer to:
Q4. Market Risk Bank of Alaska's stock portfolio has a market value of $10 million. The...
Suppose the portfolio of a large institutional investor ‘Ace’ has a beta of 1.5, and the...
Suppose the portfolio of a large institutional investor ‘Ace’ has a beta of 1.5, and the standard deviation of the rate of return on its portfolio is 15 percent. The portfolio of another institutional investor ‘Yankee’ has a beta of 0.7. The market portfolio may be expressed as a portfolio comprising the portfolios of Ace and Yankee, and its Sharpe ratio is 0.8 Suppose there is a firm called ‘Rusty Steel’, whose stock’s beta is 2 and it can borrow...
Suppose the portfolio of a large institutional investor ‘Animal’ has a beta of 1.25, and the...
Suppose the portfolio of a large institutional investor ‘Animal’ has a beta of 1.25, and the standard deviation of the rate of return on its portfolio is 15 percent and its expected rate of return is 15 percent. The portfolio of another institutional investor ‘Beast’ has a beta of 0.75. The market portfolio may be expressed as a portfolio comprising the portfolios of Animal and Beast. Suppose there is a firm called ‘Cunning corporation’, whose stock’s beta is 2 and...
A portfolio that combines the risk-free asset and the market portfolio has an expected return of...
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 9 percent and a standard deviation of 16 percent. The risk-free rate is 4.1 percent and the expected return on the market portfolio is 11 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .38 correlation with the market portfolio and a standard deviation of 60 percent?
Suppose a large institutional investor Alliance’s portfolio has a beta of 0.5. Another institutional investor Best’s...
Suppose a large institutional investor Alliance’s portfolio has a beta of 0.5. Another institutional investor Best’s portfolio has an expected return of 10 percent and a standard deviation of 15 percent. Both portfolios have the same Sharpe ratio of 0.6, and the market portfolio can be described as a portfolio comprising these two with equal weights. Suppose there is a firm called Cunning corporation, whose stock’s beta is 2 and it can borrow at the risk free rate. Cunning’s equity...
HAPPY stock returns have a covariance with the market portfolio of 0.036. The standard deviation of the returns on the market portfolio is 20%, and the expected market risk premium is 7.5%. The company has bonds outstanding total market value of $35 mill
HAPPY stock returns have a covariance with the market portfolio of 0.036. The standard deviation of the returns on the market portfolio is 20%, and the expected market risk premium is 7.5%. The company has bonds outstanding total market value of $35 million. The bond is 10% annual coupon with one-year maturity and sold each at 101.852% of the face value of $1000. The company also has 6 million shares of common stock outstanding, each selling for $20. The corporate...
Suppose a bank holds a $2 million trading position in stocks that has a beta 2.0....
Suppose a bank holds a $2 million trading position in stocks that has a beta 2.0. Suppose that the daily changes in returns for the portfolio have a mean 0 and standard deviation 1%. Determine the bank's DEAR for this equity position using a 99 percent confidence level.
Q3. Follow Bank has a S1 million position in a five-year, zero-coupon bond with a face...
Q3. Follow Bank has a S1 million position in a five-year, zero-coupon bond with a face value of $1,402,552. The bond is trading at a yield to maturity of 7.00 percent. The historical mean change in daily yields is 0.0 percent and the standard deviation is 12 basis points a. What is the modified duration of the bond? What is the maximum adverse daily yield move given that we desire no more than a 5 percent chance that yield changes...
The standard deviation of the market-index portfolio is 30%. Stock A has a beta of 1.50 and a res...
The standard deviation of the market-index portfolio is 30%. Stock A has a beta of 1.50 and a residual standard deviation of 40%. a-1. Calculate the total variance for an increase of 0.10 in its beta? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Total variance 0.3904 a-2 Calculate the total variance for an increase of 3.35% in its residual standard deviation? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Total variance...
A mutual fund manager has a $20 million portfolio with a beta of 1.3. The risk-free...
A mutual fund manager has a $20 million portfolio with a beta of 1.3. The risk-free rate is 5.5%, and the market risk premium is 9%. The manager expects to receive an additional $5 million, which she plans to invest in a number of stocks. After investing the additional funds, she wants the fund's required return to be 19%. What should be the average beta of the new stocks added to the portfolio? Negative value, if any, should be indicated...
Consider the following information Expected Standard Portfolio Return Deviation Risk-free 10% 1.0 Market 18 A 16...
Consider the following information Expected Standard Portfolio Return Deviation Risk-free 10% 1.0 Market 18 A 16 1.5 a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.5 Return b. What is the alpha of portfolio A. (Negatlve value should be Indicated by a minus sign.) Alpha c. If the simple CAPM is valid, is the situation above possible? O Yes O No
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 9 percent and a standard deviation of 16 percent. The risk-free rate is 4.1 percent and the expected return on the market portfolio is 11 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .38 correlation with the market portfolio and a standard deviation of 60 percent?
Q3. Follow Bank has a S1 million position in a five-year, zero-coupon bond with a face value of $1,402,552. The bond is trading at a yield to maturity of 7.00 percent. The historical mean change in daily yields is 0.0 percent and the standard deviation is 12 basis points a. What is the modified duration of the bond? What is the maximum adverse daily yield move given that we desire no more than a 5 percent chance that yield changes...
The standard deviation of the market-index portfolio is 30%. Stock A has a beta of 1.50 and a residual standard deviation of 40%. a-1. Calculate the total variance for an increase of 0.10 in its beta? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Total variance 0.3904 a-2 Calculate the total variance for an increase of 3.35% in its residual standard deviation? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Total variance...
A mutual fund manager has a $20 million portfolio with a beta of 1.3. The risk-free rate is 5.5%, and the market risk premium is 9%. The manager expects to receive an additional $5 million, which she plans to invest in a number of stocks. After investing the additional funds, she wants the fund's required return to be 19%. What should be the average beta of the new stocks added to the portfolio? Negative value, if any, should be indicated...
Consider the following information Expected Standard Portfolio Return Deviation Risk-free 10% 1.0 Market 18 A 16 1.5 a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.5 Return b. What is the alpha of portfolio A. (Negatlve value should be Indicated by a minus sign.) Alpha c. If the simple CAPM is valid, is the situation above possible? O Yes O No
Most questions answered within 3 hours.
-
In a titration experiment, 29.9 mL of 0.797 M HCOOH neutralizes
20.6 mL of Ba(OH)2. What...
asked 59 seconds ago -
A
roller coaster cart of mass 312 kg travels around a horizontal
curve of radius 41.3...
asked 14 minutes ago -
M1=7/Hr ==> M2=6/Hr ==> M3=9/Hr ==> M4=8/Hr ==>
Demand = 10/Hr
The diagram shows the hourly...
asked 19 seconds ago -
Ten young adults living in California rated the taste of a newly
developed sushi pizza topped...
asked 4 minutes ago -
(Cash Flow Statement) Consider the following potential events
that might have taken place at Global Conglomerate...
asked 6 minutes ago -
What kinds of transitions form the basis for AA and AE?
Can the detector differentiate wavelengths...
asked 13 minutes ago -
Twenty percent of all telephones of a certain type are submitted
for service while under warranty....
asked 14 minutes ago -
If I have a function in python, say show(B), how would I code it
so that...
asked 15 minutes ago -
Size properly the power supply that you need to purchase if you
have the following equipment....
asked 16 minutes ago -
Is voter turnout in Texas a problem? If so how can this issue be
addressed to...
asked 22 minutes ago -
Assume we have these two classes. Note that they are in
separate packages. If the code...
asked 34 minutes ago -
In 250 words, Which theory made the most sense to you in
explaining crimes in a...
asked 33 minutes ago