M4 1. The risk-free rate is equal to 1%. The tangencyportfolio has a Sharpe Ratio of 0.75. Tracy holds aportfolio with an expected return of 12.17%.Theportfolio has 50 % in the risk-free asset and therest in the tangency portfolio. The standarddeviation of the tangency portfolio isAnswers must be entered with 2 decimal placesand no dollar signs, e.g. 6 as 6.00; 32.346 as 32.35._%.2. The shares of closed-end mutual fund XYZcurrently trade at $50. XYZ has $37.36 millions inliabilities and 5.09 million shares outstanding. Thefund is traded at a 10% premium over its NAV. Theimplied value of the portfolio held by XYZ is$__millions.Answers must be entered with 2 decimal placesand no dollar signs, e.g. 6 as 6.00; 32.346 as 32.35.

Risk free rate (Rf) = 1% Tangency portfolio Sharpe ratio = 0.75 Tracy's portfolio return = 12.17%…

1. The risk-free rate is equal to 1%. The tangency portfolio has a Sharpe Ratio of 0.75. Tracy holds a portfolio with an expected return of 12.17%.The portfolio has 50 % in the risk-free asset and the rest in the tangency portfolio. The standard deviation of the tangency portfolio is --_%. Answers must be entered with 2 decimal places and no dollar signs, e.g. 6 as 6.00; 32.346 as 32.35.

1. The risk-free rate is equal to 1%. The tangency portfolio has a Sharpe Ratio of 0.75. Tracy holds a portfolio with an expected return of 12.17%.The portfolio has 50 % in the risk-free asset and the rest in the tangency portfolio. The standard deviation of the tangency portfolio is --_%. Answers must be entered with 2 decimal places and no dollar signs, e.g. 6 as 6.00; 32.346 as 32.35.

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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Consider a world with only two risky assets, A and B, and a risk-free asset. The two riskyassets are in equal supply in the market, i.e., the market portfolio M = 0.5A + 0.5B. Itis known that R¯M = 11%, σA = 20%, σB = 40% and ρAB = 0.75. The risk-free rate is2%. Assume CAPM holds.(a) What is the beta for each stock?(b) What are the values for R¯A and R¯B?

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