In addition to risk-free securities, you are currently invested in the TanglewoodFund, a broad-basedfund of stocks and other securities with an expected return of 14% and a volatility of 24%. Currently, therisk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your currentportfolio. The venture capital fund has an expected return of 20%, a volatility of 79 %, and a correlation of0.2 with the Tanglewood Fund. Assume you follow your broker's advice and put 50% of your money in theventure fund: a. What is the Sharpe ratio of the Tanglewood Fund? Answer (Already calculated): Sharperatio of the Tanglewood Fund is: 0.458 b. What is the Sharpe ratio of your new portfolio? c. What is theoptimal Sharpe ratio you can obtain by investing in the venturefund? (Hint: Use Excel and round youranswer to three decimal places.) Please use excel for last question, four people from chegg has gottenthis question wrong. Please get it right

optimal Sharpe ratio you can obtain by investing in the venturefund? (Hint: Use Excel and round your inswer to three decimal places.) Please use excel for last question, four people from chegg has gotten his question wrong. Please get it right

optimal Sharpe ratio you can obtain by investing in the venturefund? (Hint: Use Excel and round your inswer to three decimal places.) Please use excel for last question, four people from chegg has gotten his question wrong. Please get it right

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 11.16% and a volatility of 26.48%. Currently, the risk-free rate of interest is 3.94%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 24.95%, a volatility of 64.91%, and a correlation of 0.19 with the Tanglewood Fund. Calculate the required return and use it to decide whether you should add the venture capital fund to your portfolio. The required return is %. (Round to two decimal places.) Use the result of the above calculation to determine whether you should add the venture capital fund to your portfolio. Should you add the venture fund to your portfolio? (Select from the drop-down menu.)
In addition to risk - free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 9.65% and a volatility of 29.88% . Currently, the risk-free rate of interest is 2.88%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 27.64%, a volatility of 73.89%, and a correlation of 0.19 with the Tanglewood Fund. Calculate the required return and use it to decide whether you should add the venture capital fund to your portfolio. Answer: The required return is... % (Round to two decimal places)
In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broadbased fund of stocks and other securities with an expected return of 12% and a volatility of 25%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 19%, and a correlation of 0.6 with the Tanglewood Fund. Calculate the required return that make venture capital fund an attractive addition O a. 20.37% O b. 10.11% c. 7.10% O d. 13.03%
In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 14% and a volatility of 24%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 79%, and a correlation of 0.2with the Tanglewood Fund. Assume you follow your broker's advice and put 50% of your money in the venture fund: a. What is the Sharpe ratio of the Tanglewood Fund?Answer (already calculated)= 0.458 b. What is the Sharpe ratio of your new portfolio?Answer (Already calculated)= 0.322 c. What is the optimal Sharpe ratio you can obtain by investing in the venture fund? (Hint: Use Excel and round your answer to three decimal places.)The optimal Sharpe ratio you can obtain by investing in the venture fund is *enter your response here* and the percentage in…
In addition to risk free securities, you are currently invested in the Tanglewood Fund, a broad-based fund of stocks and other securities with an expected return of 14% and a volatility of 24%. Currently, the risk-free rate of interest is 3%. Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of 20%, a volatility of 79%, and a correlation of 0.2 with the Tanglewood Fund, Assume you follow your broker's advice and put 50% of your money in the venture fund: a. What is the Sharpe ratio of the Tanglewood Fund? b What is the Sharpe ratio of your new portfolio?c. What is the optimal Sharpe ratio you can obtain by investing in the venture fund? (Hint: Use Excel and tourid your answer to three decimal places.)
You are currently only invested in the Natasha Fund (aside from risk-free securities). It has an expected return of 14% with a volatility of 20%. Currently, the risk-free rate of interest is 3.8%. Your broker suggests that you add Hannah Corporation to your portfolio. Hannah Corporation has an expected return of 20%, a volatility of 60%, and a correlation of 0 with the Natasha Fund. Is your broker right? You follow your broker’s advice and make a substantial investment in Hannah stock so that, considering only your risky investments, 60% is in the Natasha Fund and 40% is in Hannah stock. When you tell your finance professor about your investment, he says that you made a mistake and should reduce your investment in Hannah. Is your finance professor right? You decide to follow your finance professor’s advice and reduce your exposure to Hannah. Now Hannah represents 15% of your risky portfolio, with the rest in the Natasha fund. Is this the correct amount of Hannah stock to hold?…
You are working on creating a portfolio that mimics a fully diversified market index.Assume that you have $1 million fund to invest. You plan to allocate $195,000 and $365,000of your fund to invest in stock A and B, respectively. To achieve your goal, you need to add anadditional risky stock C and a risk-free bond to your portfolio. How much would you invest instock C and risk-free bond?
You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000 invested in Treasury Securities (assume risk-free), and $12000 invested in an index fund tracking the market. According to surveys, the expected market risk premium is 6.6%, Risk-free rate is 1.3%. What is the expected return of this portfolio according to CAPM?
You are working on creating a portfolio that mimics a fully diversified market index. Assume that you have $1 million fund to invest. You plan to allocate $195,000 and $365,000 of your fund to invest in stock A and B, respectively. To achieve your goal, you need to add an additional risky stock C and a risk-free bond to your portfolio. Assume that betas for stock A, B, and C are 0.80, 1.09, and 1.23, respectively. How much would you invest in stock C and risk-free bond?
You plan to invest in the Kish Hedge Fund, which has totalcapital of $500 million invested in five stocks given below: Kish’s beta coefficient can be found as a weighted average of its stocks’ betas. The risk-freerate is 6%, and you believe the following probability distribution for future market returnsis realistic:Probability Market Return0.1 228%0.2 00.4 120.2 300.1 50a. What is the equation for the security market line (SML)? (Hint: First, determine theexpected market return.)b. Calculate Kish’s required rate of return.c. Suppose Rick Kish, the president, receives a proposal from a company seeking newcapital. The amount needed to take a position in the stock is $50 million, it has anexpected return of 15%, and its estimated beta is 1.5. Should Kish invest in the newcompany? At what expected rate of return should Kish be indifferent to purchasingthe stock?
Your client, Sandra is considering three assets: a bond mutual fund, a cryptocurrency ETF, and US Treasury bills. The annualized T-bill rate is 2%. The information below refers to the two risky assets. Expected return Standard deviation Bond mutual fund Cryptocurrency ETF 3% 10% Correlation coefficient 0 14% 20% (a) What are the proportions of each asset, in Sandra's optimal risky portfolio? (b) Suppose the return for each risky asset follows a normal distribution. What is the 1% value-at-risk for Sandra's optimal risky portfolio? Hint: P(Z<-2.326) = 0.01 where Z~N(0, 1).
You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Stock A B C D E Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 4%, and you believe the following probability distribution for future market returns is realistic: Investment $160 million 120 million 80 million 80 million 60 million Probability 0.1 0.2 0.4 0.2 0.1 a. What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.) Stock's Beta Coefficient 0.4 1.0 1.8 1.0 1.3 -Select- ◆ Market Return I. r₁ = 3.8% + (10.1%) bi II. r = 4.0% + (9.6%)bi III. r₁ = 5.9% + (9.3%)bi IV. r₁ = 5.9% + (9.6%)bi V. r₁ = 4.0% + (9.3%)bi -24% 0 11 30 53 b. Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places. % c. Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a…

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