An investor invests 60% of his wealth in a risky asset which has an expected return of 15% and a variance of 4% and 40% of his wealth in a risk-free security that pays 6% return. What is the expected return and standard deviation of the portfolio?
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An investor invests 60% of his wealth in a risky asset which has an expected return of 15% and a variance of 4% and 40% of his wealth in a risk-free security that pays 6% return. What is the expected return and standard deviation of the portfolio?
A. 0% and 12.0%, respectively
B. 6% and 8.0%, respectively
C. 6% and 10.0%, respectively
D. 4% and 12.0%, respectively
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- b. A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent. The risk-free rate is 4 percent, and the expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a 45 correlation with the market portfolio and a standard deviation of 55 percent?A portfolio that combines the risk-free asset and the market portfolio has an expected return of 6.2 percent and a standard deviation of 9.2 percent. The risk-free rate is 3.2 percent, and the expected return on the market portfolio is 11.2 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .37 correlation with the market portfolio and a standard deviation of 54.2 percent? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)An investment has probabilities 0.15, 0.34, 0.44, 0.67, 0.2 and 0.15 of giving returns equal to 50%, 39%, -4%, 20%, -25%, and 42%. What are the expected returns and the standard deviations of returns?
- Suppose the total risk of Portfolios A, B and C are 49% ², 64%² and 100% ² respectively. The market price of risk is 8%. The Market Portfolio (M) has an expected return and a total risk of 11% and 100% respectively. (a) You want to form another Portfolio H by investing $7,000 in Portfolio A and $3,000 in Portfolio B. Compute the standard deviation of Portfolio H if the correlation coefficient between Portfolio A and Portfolio B is: i) perfectly positively correlated ii) uncorrelated iii) perfectly negatively correlated (b) If the expected return of Portfolio C is 9.4% and it is lying on the Securities Market Line, what is the beta of Portfolio C? State the answer in %². (c) Is Portfolio C a Market Portfolio as it has same level of total risk (i.e. 100% 2) as the Market Portfolio? Why or Why not?You invest $1,000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04.What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.11? A. 62.5% and 37.5% B. 53.8% and 46.2% C. Cannot be determined. D. 75% and 25% E. 46.2% and 53.8%Suppose the risk-free rate is 6 percent and the market portfolio has an expected return of 12 percent. The market portfolio has a standard deviation of 7 percent. Portfolio Z has a correlation coefficient with the market of 0.35 and standard deviation of 6 percent. According to the capital asset pricing model, what is the expected return on portfolio Z a. 12.6 percent b. 7.8 percent c. 9.87 percent d. 12.05 percent
- The optimal risky portfolio has an expected return of 15% and a standard deviation of 10%. The risk-free rate is 1%. What is the fraction of wealth that should be invested in the optimal risky portfolio (with the rest in the risk-free asset) for a risk-averse investor with a risk aversion coefficient A equal to 1.7? O 83.33% 88.24% 78.95% 75%An investor with a risk aversion of 3.5 can buy a risk-free asset with an expected return of 3% and risky asset with an expected return of 25% and a standard deviation of 50%. What will be the expected return of the complete portfolio? 8.5% 9.2% 10.7% 12.1%An investor wants to design a complete portfolio with an expected rate of return of 15% from two risky and one risk-free assets. The first risky asset has an expected return of 13% and a standard deviation of return of 20%. The second risky asset has an expected return of 7% and a standard deviation of return of 5%. The correlation coefficient between the returns of the two risky assets is 0.40. The risk-free rate of return is 1%. What is the allocation of the investor’s money across these three assets?