3. You have worked with your client and put together an investment portfolio based on the client's preferences for risk. The portfolio will be divided among several asset classes defined below. Asset Class Allocation Expected Return Standard Deviation of Returns 10 Year T-Bonds 37% 4.13% 0.00% International Bonds (Private Corporate) 12% 6.32% 34.23% Rusell 2000 ETF 41% 6.70% 12.32% FTSE 100 ETF 10% 32.10% 21.30% 100% a. What is the expected return for this portfolio? Provide the result as x.xx%. b. What is the expected return for the portfolio if you decide not to invest in treasury bonds? Provide the result as x.xx%. c. What asset class would you eliminate to maximize expected return? Explain why. 4. You have landed an interview with Gold & Silver Bank, and they are asking you to calculate the expected return on a series of assets they are evaluating. They provide the data below and have sent you a few additional questions. Risk-free rate 5.26% Stock Expected Return Betas ALMM 45.32% 9.2 AIR 34.10% 5.1 BLUE 61.20% 3.7 MON 87.20% 4.5 Given the expected return on an asset, E(Ri), is equal to the risk-free rate, Rf, plus the risk premium. E(R) = Rf + [E(RM) - Rƒ] × ẞi What is each stock's expected return, E(Ri)? Provide the result as x.xx%.
3. You have worked with your client and put together an investment portfolio based on the client's preferences for risk. The portfolio will be divided among several asset classes defined below. Asset Class Allocation Expected Return Standard Deviation of Returns 10 Year T-Bonds 37% 4.13% 0.00% International Bonds (Private Corporate) 12% 6.32% 34.23% Rusell 2000 ETF 41% 6.70% 12.32% FTSE 100 ETF 10% 32.10% 21.30% 100% a. What is the expected return for this portfolio? Provide the result as x.xx%. b. What is the expected return for the portfolio if you decide not to invest in treasury bonds? Provide the result as x.xx%. c. What asset class would you eliminate to maximize expected return? Explain why. 4. You have landed an interview with Gold & Silver Bank, and they are asking you to calculate the expected return on a series of assets they are evaluating. They provide the data below and have sent you a few additional questions. Risk-free rate 5.26% Stock Expected Return Betas ALMM 45.32% 9.2 AIR 34.10% 5.1 BLUE 61.20% 3.7 MON 87.20% 4.5 Given the expected return on an asset, E(Ri), is equal to the risk-free rate, Rf, plus the risk premium. E(R) = Rf + [E(RM) - Rƒ] × ẞi What is each stock's expected return, E(Ri)? Provide the result as x.xx%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:3. You have worked with your client and put together an investment portfolio based on the client's
preferences for risk. The portfolio will be divided among several asset classes defined below.
Asset Class
Allocation
Expected Return
Standard Deviation of Returns
10 Year T-Bonds
37%
4.13%
0.00%
International Bonds (Private
Corporate)
12%
6.32%
34.23%
Rusell 2000 ETF
41%
6.70%
12.32%
FTSE 100 ETF
10%
32.10%
21.30%
100%
a. What is the expected return for this portfolio? Provide the result as x.xx%.
b. What is the expected return for the portfolio if you decide not to invest in treasury bonds? Provide
the result as x.xx%.
c. What asset class would you eliminate to maximize expected return? Explain why.
![4. You have landed an interview with Gold & Silver Bank, and they are asking you to calculate the
expected return on a series of assets they are evaluating. They provide the data below and have sent
you a few additional questions.
Risk-free rate
5.26%
Stock
Expected Return
Betas
ALMM
45.32%
9.2
AIR
34.10%
5.1
BLUE
61.20%
3.7
MON
87.20%
4.5
Given the expected return on an asset, E(Ri), is equal to the risk-free rate, Rf, plus the risk premium.
E(R) = Rf + [E(RM) - Rƒ] × ẞi
What is each stock's expected return, E(Ri)? Provide the result as x.xx%.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F19e68c0f-f857-4272-8883-1edf3d8c3583%2F7024f622-c501-49cd-b509-cdff81add0ec%2Faxwdqgp_processed.png&w=3840&q=75)
Transcribed Image Text:4. You have landed an interview with Gold & Silver Bank, and they are asking you to calculate the
expected return on a series of assets they are evaluating. They provide the data below and have sent
you a few additional questions.
Risk-free rate
5.26%
Stock
Expected Return
Betas
ALMM
45.32%
9.2
AIR
34.10%
5.1
BLUE
61.20%
3.7
MON
87.20%
4.5
Given the expected return on an asset, E(Ri), is equal to the risk-free rate, Rf, plus the risk premium.
E(R) = Rf + [E(RM) - Rƒ] × ẞi
What is each stock's expected return, E(Ri)? Provide the result as x.xx%.
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