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The following expected return and the standard deviation of current returns are known:
| Security (i) | Expected Return | Standard Deviation |
βi |
| A | 0.20 | 0.12 | 1.1 |
| B | 0.12 | 0.10 | 0.8 |
| T-Bills | 0.05 | 0 | 0 |
| Market Portfolio | 0.20 | 0.15 | 1 |
Required:
Determine which of A or B is over-valued or undervalued.
Step by step
Solved in 4 steps
- You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio X Y Z Market Risk-free Rp 11.0% ор 33.00% 10.0 28.00 8.1 10.4 5.2 18.00 23.00 Ө вр 1.45 1.20 0.75 1.00 Ө Assume that the correlation of returns on Portfolio Y to returns on the market is 0.66. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places. R-squaredThe following expected return and the standard deviation of current returns are known: Security (i) Expected Return Standard Deviation βi A 0.20 0.12 1.1 B 0.12 0.10 0.8 T-Bills 0.05 0 0 Market Portfolio 0.20 0.15 1 a) Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and the market portfolio. b) Determine which of A or B is over-valued or undervalued. c) How will you invest $1000 in riskless T-bills and the risky assets in the Market Portfolio to maintain a standard deviation of 10%.As diversification increases, the firm-specific risk of a portfolio approaches A. 1. B. infinity. C. 0. D. (n – 1) × n.
- The following expected return and the standard deviation of current returns are known: Security (i) Expected Return Standard Deviation βi A 0.20 0.12 1.1 B 0.12 0.10 0.8 T-Bills 0.05 0 0 Market Portfolio 0.20 0.15 1 Required: Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and the market portfolio.You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio X Y Z Market Risk-free Rp 14.0% 13.0 .8.5 12.0 7.2 Ор 39.00% 34.00 24.00 29.00 0 Bp 1.50 1.15 0.90 1.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.90. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places. R-squaredWhat is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation (SDi), covariance (COVij), and asset weight (Wi) are as shown below? Asset (A) E(R₂) = 10% SDA = 8% WA = 0.25 COVAB = 0.006 Select one: A. 13.75% B. 7.72% C. 12.5% D. 8.79% Asset (B) E(RB) = 15% SDB = 9.5% WB = 0.75
- According to CAPM, the expected rate of return of a portfolio with a beta of 1.0 and an alpha of 0 is:a. Between rM and rf .b. The risk-free rate, rf .c. β(rM − rf).d. The expected return on the market, rM.Consider the following information for four portfolios, the market, and the risk-free rate (RFR): Portfolio Return Beta SD A1 0.15 1.25 0.182 A2 0.1 0.9 0.223 A3 0.12 1.1 0.138 A4 0.08 0.8 0.125 Market 0.11 1 0.2 RFR 0.03 0 0 Refer to Exhibit 18.6. Calculate the Jensen alpha Measure for each portfolio. a. A1 = 0.014, A2 = -0.002, A3 = 0.002, A4 = -0.02 b. A1 = 0.002, A2 = -0.02, A3 = 0.002, A4 = -0.014 c. A1 = 0.02, A2 = -0.002, A3 = 0.002, A4 = -0.014 d. A1 = 0.03, A2 = -0.002, A3 = 0.02, A4 = -0.14 e. A1 = 0.02, A2 = -0.002, A3 = 0.02, A4 = -0.14The following expected return and the standard deviation of current returns are known: Security (i) Expected Return Standard Deviation βi A 0.20 0.12 1.1 B 0.12 0.10 0.8T-Bills 0.05 0 0Market Portfolio 0.20 0.15 1 a) Determine the weights of a portfolio with a standard deviation of 7% created by combining T-Bill and the market portfolio. b) Determine which of A or B is over-valued or undervalued. c) How will you invest $1000 in riskless T-bills and the risky assets in the Market Portfolio to maintain a standard deviation of 10%. Pls show procedure, thanks
- You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 13.5% бр 35.00% 12.5 30.00 7.1 20.00 10.6 4.4 25.00 0 Вр 1.55 1.20 0.80 1.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.70. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places. × Answer is complete but not entirely correct. R-squared 0.9785You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: 8p 1.70 1.30 0.85 1.00 Portfolio X Y Z Market Risk-free Rp 11.5% 10.5 7.2 10.9 4.6 R-squared op 38.00% 33.00 23.00 28.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.76. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places.The return, standard deviation, market risk premium and Beta (β) of A, B, C, D and the Market Portfolio and the risk-free interest rate are given in the table below. Find the performance of portfolios (excluding Sortino). portfolio return (rp) risk free interest rate (rf) std. deviation Beta market risk premium (rp- rf) A 18,00 11,00 6,00 1,24 7,00 B 12,00 11,00 2,00 0,87 1,00 C 9,00 11,00 0,50 - 0,73 - 2,00 D 15,00 11,00 3,00 0,46 4,00 Market 13,00 11,00 1,50 1 2,00
