eBookProblem 6-09As chief investment officer of a small endowment fund, you are considering expanding the fund'sstrategic asset allocation from just common stock (CS) and fixed-income (FI) to include private realestate partnerships (PR) as well:Current Allocation: 60 percent of Asset CS, 40 percent of Asset FIProposed Allocation: 45 percent of Asset CS, 25 percent of Asset FI, 30 percent of Asset PRYou also consider the following historical data for the three risky asset classes (CS, FI, and PR) and therisk-free rate (RFR) over a recent investment period:Asset ClassCSFIPRRFRE(R)%8.1%016.4%8.311.2CS1.00.30.7rij:FI1.05.16.73.5You have already determined that the expected return and standard deviation for the Current Allocationare: E(Rcurrent) = 6.90 percent and current = 11.289 percent.a. Calculate the expected return for the Proposed Allocation. Round your answer to two decimal places.6.93b. Calculate the standard deviation for the Proposed Allocation. Do not round intermediate calculations.Round your answer to two decimal places.8.37%%c. For both the Current and Proposed Allocations, calculate the expected risk premium per unit of risk(that is, [E(R₂) - RFR]/o). Do not round intermediate calculations. Round your answers to threedecimal places.Current Allocation:PR0.21.0Proposed Allocation:d. Using your calculations from part (c), explain which of these two portfolios is the most likely to fall onthe Markowitz efficient frontier.The -Select-is the most likely to fall on the Markowitz efficient frontier.

Asset classE(r)SDCSFIPRCurrent allocationProposed…

B eBook Problem 6-09 As chief investment officer of a small endowment fund, you are considering expanding the fund's strategic asset allocation from just common stock (CS) and fixed-income (FI) to include private real estate partnerships (PR) as well: Current Allocation: 60 percent of Asset CS, 40 percent of Asset FI Proposed Allocation: 45 percent of Asset CS, 25 percent of Asset FI, 30 percent of Asset PR You also consider the following historical data for the three risky asset classes (CS, FI, and PR) and the isk-free rate (RFR) over a recent investment period: Asset Class CS E(R) 8.1% σ 16.4% CS 1.0 rij: FI PR

B eBook Problem 6-09 As chief investment officer of a small endowment fund, you are considering expanding the fund's strategic asset allocation from just common stock (CS) and fixed-income (FI) to include private real estate partnerships (PR) as well: Current Allocation: 60 percent of Asset CS, 40 percent of Asset FI Proposed Allocation: 45 percent of Asset CS, 25 percent of Asset FI, 30 percent of Asset PR You also consider the following historical data for the three risky asset classes (CS, FI, and PR) and the isk-free rate (RFR) over a recent investment period: Asset Class CS E(R) 8.1% σ 16.4% CS 1.0 rij: FI PR

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter15: Mutual And Exchange Traded Funds

Section: Chapter Questions

Problem 6FPC

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As chief investment officer of a small endowment fund, you are considering expanding the fund's strategic asset allocation from just common stock (CS) and fixed-income (FI) to include private real estate partnerships (PR) as well: Current Allocation: 60 percent of Asset CS, 40 percent of Asset FI Proposed Allocation: 50 percent of Asset CS, 30 percent of Asset FI, 20 percent of Asset PR You also consider the following historical data for the three risky asset classes (CS, FI, and PR) and the risk-free rate (RFR) over a recent investment period: rij: Asset Class E(R) CS σ CS FI PR 8.2% 17.0% 1.0 FI 5.6 7.6 0.3 1.0 PR RFR 6.9 3.5 12.5 0.6 0.2 1.0 - You have already determined that the expected return and standard deviation for the Current Allocation are: E(Rcurrent) = 7.16 percent and current = 11.484 percent. a. Calculate the expected return for the Proposed Allocation. Round your answer to two decimal places. % b. Calculate the standard deviation for the Proposed Allocation. Do not…
(10 POINTS) Consider the following funds whose expected returns and volatilities are given in the following table: \table [[Type of fund, Er,, o,, management fee (f) 5. (10 POINTS) Consider the following funds whose expected returns and volatilities are given in the following table: Type of fund Bio tech fund (B) Er σi management fee (f) .40 .60 .04 Critical minerals fund (C) .26 .40 .03 Market portfolio (M) .18 .24 0 where the management fee (f) is the percentage fee for holding the fund. The risk-free rate is 0.04.Is this situation compatible with the CAPM? Justify your answer.
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