You manage an equity fund with an expected risk premium of 14% and a standard deviation of 54%. The rate on Treasury bills is 6.8%. Your client chooses to invest $120,000 of her portfolio in your equity fund and $30,000 in a T-bill money market fund. 1. What is the risk-aversion index of your client?
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You manage an equity fund with an expected risk premium of 14% and a standard deviation of 54%. The rate on Treasury bills is 6.8%. Your client chooses to invest $120,000 of her portfolio in your equity fund and $30,000 in a T-bill
1. What is the risk-aversion index of your client?
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- You manage an equity fund with an expected risk premium of 14% and a standard deviation of 54%. The rate on Treasury bills is 6.8%. Your client chooses to invest $120,000 of her portfolio in your equity fund and $30,000 in a T-bill money market fund.(1) What is the expected return and standard deviation of return on your client’s portfolio?(2) What is the reward-to-volatility ratio for the equity fund?(3) What is the risk-aversion index of your client?You manage an equity fund with an expected risk premium of 8% and an expected standard deviation of 10%. The rate on Treasury bills is 5%. Your client chooses to invest OMR70,000 of her portfolio in your equity fund and OMR30,000 in a T-bill money market fund. What is the expected return and standard deviation of return on your client's portfolio?You manage an equity fund with an expected risk premium of 11.2% and a standard deviation of 26%. The rate on Treasury bills is 4.2%. Your client chooses to invest $70,000 of her portfolio in your equity fund and $30,000 in a T-bill money market fund. What are the expected return and standard deviation of your client’s portfolio? (Round your answers to 2 decimal places.)
- What follows is a numeric fill in the blank question with 5 blanks.You manage an equity fund with an expected risk premium of 10% and an expected standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest $60,000 of her portfolio in your equity fund and $40,000 in a T-bill money market fund. What is the expected return and standard deviation of return on your client’s portfolio? a. Expected return for equity fund: Blank 1. Fill in the blank, read surrounding text. %. b. Expected rate of return of the client’s portfolio: Blank 2. Fill in the blank, read surrounding text % c. Expected Return of the client's portfolio: $ Blank 3. Fill in the blank, read surrounding text. d. The standard deviation of the client's overall portfolio: Blank 4. Fill in the blank, read surrounding text. % (Round to one decimal place.) e. Calculate the Sharpe ratio for the equity fund: Blank 5. Fill in the blank, read surrounding text. (Round to TWO decimal places.)1. You manage an equity fund, Panda Eyes, with an expected risk premium of 10% anda standard deviation of 14%. The risk-free rate is 6%. Your client chooses to invest£60,000 of their portfolio in your equity fund and £40,000 in the risk-free rate. # Calculate the expected return and standard deviation of the return onyour client’s portfolio.As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U}: Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 a. If the risk-free rate is 3.9 percent and the expected market risk premium (£(RM) -RFR} is 6.1 percent, calculate the expected return for each mutual fund according to the CAPM. b. Using the estimated expected returns from part (a) along with your own return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?
- Assume that you manage a risky portfolio with an expected rate of return of 14% and a standard deviation of 46%. The T-bill rate is 4%. Your client chooses to invest 85% of a portfolio in your fund and 15% in a T-bill money market fund. Required: a. What are the expected return and standard deviation of your client's portfolio? (Round your answers to 1 decimal place.) Expected retum Standard deviation b. Suppose your risky portfolio includes the following investments in the given proportions: 30% 30 40 Stock A Stock B Stock C What are the investment proportions of your client's overall portfolio, including the position in T-bills? (Round your answers to 1 decimal place.) Security T-Bills Stock A Stock B Stock C Investment Proportions % per year % per year % % % % Risky portfolio Client's overall portfolio c. What is the reward-to-volatility ratio (S) of your risky portfolio and your client's overall portfolio? (Round your answers to 4 decimal places.) Reward-to-Volatility RatioAssume that you manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 42%. The T-bill rate is 6%. Your client chooses to invest 85% of a portfolio in your fund and 15% in a T-bill money market fund. Required: a. What are the expected return and standard deviation of your client's portfolio (Round your answers to 1 decimal place.) Expected return Standard deviation b. Suppose your risky portfolio includes the following investments in the given proportions: 26% 35 39 Stock A Stock B Stock C What are the investment proportions of your client's overall portfolio, including the position in T-bills? (Round your answers to 1 decimal place.) Security T-Bills Stock A Stock B Stock C % per year % per year Investment Proportions % % % %Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 5.00%. What rate of return should investors expect (and require) on this fund? (Hint: first calculate the weights, then calculate the beta of the portfolio and then calculate the required return of the portfolio.) Show your work. Stock Amount Weights Beta A $1,075,000 ? 1.20 B 675,000 ? 0.50 C 750,000 ? 1.40 D 500,000 ? 0.75 $3,000,000
- You manage a risky portfolio with expected rate of return of 18% and standard deviation of 28%. The T-bill rate is 8%. a. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. What is the expected value and standard deviation of the rate of return on his portfolio? b. What is the reward-to-volatility ratio (S) of your risky portfolio? Your client’s? c. Draw the CAL of your portfolio on an expected return–standard deviation diagram. What is the slope of the CAL? Show the position of your client on your fund’s CAL. d. Suppose that your client decides to invest in your portfolio a proportion y of the total investment budget so that the overall portfolio will have an expected rate of return of 16%. What is the proportion y? What is the standard deviation of the rate of return on your client’s portfolio? e. Suppose that your client prefers to invest in your fund a proportion y that maximizes the expected return on the complete portfolio subject…You manage a risky portfolio with an expected rate of return of 18% and a standard deviation of 28%. The T-bill rate is 8%. Your client’s degree of risk aversion is A = 3.5.a. What proportion, y, of the total investment should be invested in your fund?b. What is the expected value and standard deviation of the rate of return on your client’s optimized portfolio?After learning the course, you divide your portfolio into three equal parts (i.e., equal market value weights), with one part in Treasury bills, one part in a market index, and one part in a mutual fund with beta of 0.89. What is the beta of your overall portfolio?
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