Bill formed his optimal complete portfolio worth $1000 out of 2 assets: A T-bill with a return of 5%, and a risky portfolio P with an expected return of 15% and a return volatility of 20%. Bill's coefficient of risk aversion is 2. Which of the following statements is true about Bill's optimal complete portfolio? O Bill invests nothing in the risky portfolio P. Bill buys $500 worth of the T-bill. O Bill invests $1000 in the risky portfolio. O Bill borrows $250 at the risk free rate.
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- Suppose an investor wants to invest $X in a one-month portfolio consisting of ONE risk-free asset and ONE ACTUAL (not synthetic) risky asset. Which of the following statement(s) is (are) FALSE? The investor can invest between 0% and 100% of her funds in the risk free asset The investor can invest 100% of her funds in the risky asset The investor can "short" the risk free asset and use the funds to invest in the risky asset The investor can invest 100% of her funds in the risk free asset The investor can "short" the risky asset and use the funds to invest in the risk-free asseth An investor has $1000 initial wealth for investment and he borrows another $500 at the risk free rate. He then invest the entire total amount of $1500 in the market portfolio. What is his portfolio beta? O 0 +2.0 +1.5 -1.0You want your portfolio beta to be .95. Currently, your portfolio consists of $4,000 invested in Stock A with a beta of 1.26 and $7,000 in Stock B with a beta of .94. You have another $8,000 to invest and want to divide it between an asset with a beta of 1.74 and a risk-free asset. How much should you invest in the risk-free asset? Multiple Choice O $3,966 $4,425 $4,902 $4,305 $5,083
- ou invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T-bill with a rate of return of 0.05.What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.06? Multiple Choice 60% and 40% 50% and 50% 40% and 60% Cannot be determined. 30% and 70%You invest $1,000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04.What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.11? A. 62.5% and 37.5% B. 53.8% and 46.2% C. Cannot be determined. D. 75% and 25% E. 46.2% and 53.8%Ebenezer Scrooge has invested 50% of his money in share A and the remainder in share B. He assesses their prospects as follows: A B Expected return (%) 15 21 Standard deviation (%) 22 24 Correlation between returns 0.6 a. What are the expected return and standard deviation of returns on his portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b. How would your answer change if the correlation coefficient were 0 or –0.60? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
- 2. An investor is evaluating a two-asset portfolio of the following two securities. Portfolio A: 75% Ooredoo and 25% Woqod Portfolio B: Investor has QAR 100,000 and will invest QAR 50,000 in Woqod Expected returns and risks: ● ● ● ● Expected Return 12.50% Woqod 10.80% The correlation between Ooredoo and Woqod is 0.72. Calculate: a. Expected return of both the portfolios Security Ooredoo Expected Risk (0) 26.40% 22.50%A Moving to another question will save this response. Question 28 An investor has $1000 initial wealth for investment and he borrows another $1000 at the risk free rate. He then invest the entire total amount of $2000 in the market portfolio. What is his portfolio beta? 00 O -1.0 +1.0 +2.0 Moving to another question will save this responAssume the market has the following assets: Asset Expected Return (%) Standard Deviation (%) X 18% 10% Y 14% 8% Z 10% 12% Jayaraman is considering to invest in only ONE (1) asset from the list above. Explain his choice if he is (i) risk averse (ii) risk neutral (iii) risk seeking
- Question 6 Suppose that an investor has £1,000,000 to invest in a portfolio containing stocks A, B and a risk-free asset. The investor must invest all her money, and she is using the Capital Asset Pricing Model (CAPM) to make predictions of the expected return-beta relationship. Her objective is to create a portfolio that has an expected return of 14% and which has a beta of 0.75. If stock A has an expected return of 30% and a beta of 1.9, stock B has an expected return of 20% and a beta of 1.4, and the risk-free rate is 8%, how much money will she invest in stock A? Explain your answer and show your calculations.The investor has R50,000 to invest A, B and C. R12,000 will be invested into asset A. The beta for asset A and asset B is 0.90 and 1.2 respectively. Asset C represents the risk-free asset. If the investor envisages a portfolio equally as risky as the market, how much should be invested into asset B? Which answer is correct? A. 32677 B. 32676 C. 32667 D. 32678What is the beta of a portfolio made up of two risky assets and a risk-free asset? You invest 35% in asset A with a beta of 1.2 and 35% in asset B with a beta of 1.1. Select one: O a. 0.66 O b.1.29 O C. 0.81 O d.1.14 O e. 1.03