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Question content area bottom
Part 1
|
|
Portfolio Weights
|
|||
Asset
|
Asset Beta
|
Portfolio A
|
Portfolio B
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||
1
|
1.35
|
17%
|
|
29%
|
|
2
|
0.69
|
26%
|
|
8%
|
|
3
|
1.24
|
10%
|
|
22%
|
|
4
|
1.06
|
11%
|
|
20%
|
|
5
|
0.87
|
36%
|
|
21%
|
|
Total
|
100%
|
|
100%
|
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- Question 2 Consider an investment portfolio consisting of stocks as well as options on stocks. You would like to determine the value at risk (VaR) for this portfolio and are thinking about the technique to be used. Discuss the problem with using the model-building or variance-covariance approach for determining the VaR of this portfolio.use attachments to answer question This question relates to Diagrams 6 - 9 from the 9.2 diagrams, each of which shows a set of portfolios plotted on a set of risk/return axes. Which diagram shows (in red) the set of efficient portfolios in the presence of a risk-free asset? Select one: a. Diagram 6 b. Diagram 7 c. Diagram 8 d. Diagram 9Write out the equation for the Capital Market Line (CML), and draw it on the graph. Interpret the plotted CML. Now add a set of indifference curves and illustrate how an investors optimal portfolio is some combination of the risky portfolio and the risk-free asset. What is the composition of the risky portfolio?
- Consider the following performance data for a portfolio manager: Benchmark Portfolio Index Portfolio Weight Weight Return Return Stocks 0.65 0.7 0.11 0.12 Bonds 0.3 0.25 0.07 0.08 Cash 0.05 0.05 0.03 0.025 a.Calculate the percentage return that can be attributed to the asset allocation decision. b.Calculate the percentage return that can be attributed to the security selection decision.Use attachments to answer questions This question relates to Diagram 5 from the 9.2 diagrams, which shows four different feasible portfolios plotted on a set of risk/return axes. Which portfolio would a risk-averse investor prefer - Portfolio A or Portfolio G? Select one: a. Portfolio A. b. Portfolio G. c. The investor would be indifferent between the two portfolios. d. We cannot tell without more information about the investors attitude towards risk (i.e. how risk-averse the investor is).You are working as a portfolio associate and your manager assigned task to find out which investment option is feasible for existing portfolio. All of the investment options are riskier than market however still manager wants to optimize its risk in given investment options. Requirements: Calculate Average of each of the investment option. Calculate the Risk of each of the investment option. Calculate the Co-efficient of Variation of each investment option. Calculation of correlation each of the investment option. Calculate Beta of each of the investment option. Give your conclusion or recommendation which investment option is best for you in comparison to least risky.
- 9. Jason Jackson is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. He is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered the following data: ®. a. Calculate the betas for portfolios A and B. b. Compare the risk of each portfolio to the market as well as to each other. Which portfolio is more risky? Review Only Click the icon to see the Worked Solution. a. The beta of portfolio A is (Round to three decimal places.) The beta of portfolio B is (Round to three decimal places.) b. Portfolio (1) is slightly less risky than the market (average risk), while portfolio (2). IS more risky than the market. Portfolio (3) given increase or decrease in market risk. (Select from the drop-down menus.) L's return will move more than portfolio (4)- 's for a Portfolio (5)- is the more risky portfolio. (Select from the drop-down menu.) 8: Data Table (Click on the icon here in…Using the stock price data for any two companies provided below carry out the following tasks: 1.Compute, for each asset: i.Total Returns ii.Expected returns iii.standard deviation iv.Correlation Coefficient 2.Construct the variance-covariance matrix 3.Construct equally weighted portfolio and calculate Expected Return, Standard Deviation and Sharpe ratio. 4.Reconstruct equally weighted portfolio and calculate Expected Return, Standard Deviation and Sharpe ratio. 5.Use Solver to determine optimal risky portfolio. 6.Create hypothetical portfolios (commencing from Weight A=0 and weight B=100) 7.Calculate Expected return and Standard Deviation for all the above combinations 8.Graph the efficient frontier 9.Graph the optimal portfolio 10.Assuming that the investors prefers lower level of risk than what a portfolio of risky assets offer, introduce a risk free asset in the portfolio with a return of 3% 11.Using hypothetical weights (A= Portfolio of Risky Assets, B= 1 Risk Free…9.2- Use the diagrams to answer the question q3- This question relates to Diagrams 6 - 9 from the Online Quiz 9.2 diagrams, each of which shows a set of portfolios plotted on a set of risk/return axes. Which diagram shows (in red) the set of efficient portfolios in the presence of a risk-free asset? Select one: a. Diagram 6 b. Diagram 7 c. Diagram 8 d. Diagram 9
- You are attempting to evaluate two possible portfolios, which consist of the same five assets held in different proportions. You are particularly interested in using beta to compare the risks of the portfolios, so he has gathered the data shown in the following table. Calculate the betas for portfolios X and Y. Compare the risks of these portfolios to the market as well as to each other. Which portfolio is more risky?The optimal proportion of the risky asset in the complete portfolio is given by the equation below y*= E(Rp− Rf) A0² For each of the variables on the right side of the equation, discuss the impact of the variable's effect on y* and why the nature of the relationship makes sense intuitively. Assume the investor is risk averseQUESTION:How do investors make decision to invest into a portfolio which is the combination of 2 risky assets through the factor of correlation coefficient? What happens if the correlation of the 2 assets is close to 1, is close to 0?