6- An investor invests 45% of his wealth in a risky asset with an expected rate of return of 0.20 and a variance of 0.12 and 65% in a T-bill that pays 4%. His portfolio's expected return and standard deviation are and respectively. 130 a) 0.197; 0.144 b) 0.098; 0.111 c) 0.086; 0.136 d) 0.112; 0.054
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- 1. Given the following summary statistics, Mean S.D. 1.235 0.997 Asset A 0.52 Asset B. 0.44 (a) If the correlation between the two financial series is 0.25. What are the optimal portfolio weights to minimize risk? (b) What are the expected return and standard deviation of the optimal port- folio? (c) Compute the 1% Value-at-Risk for the next 5 days (d) Compute the expected shortfallYou invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T-bill with a rate of return of 0.05. 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 0.09? Group of answer choices a. 85% and 15% b. 75% and 25% c. 67% and 33% d. 57% and 43%What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation (SDi), covariance (COVij), and asset weight (Wi) are as shown below? Asset (A) E(R₂) = 25% SDA = 18% WA = 0.75 COVA, B = -0.0009 Select one: A. 13.65% B. 20 U ODN 20.0% C. 18.64% D. 22.5% Asset (B) E(R₂) = 15% SDB = 11% WB = 0.25
- A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. The risk-free rate is 6%. An investor has the following utility function: U = E(r) - (A/2)s2. Which value of A makes this investor indifferent between the risky portfolio and the risk-free asset? A. 5 B. 8 C. 6 D. 7What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation (SDi), covariance (COVij), and asset weight (Wi) are as shown below? Asset (A) E(R₂) = 10% SDA = 8% WA = 0.25 COVAB = 0.006 Select one: A. 13.75% B. 7.72% C. 12.5% D. 8.79% Asset (B) E(RB) = 15% SDB = 9.5% WB = 0.75An investor invests 30% of his wealth in a risky asset with an expected rate of return of 0.15 and a variance of 0.04 and 70% in a T-bill that pays 6%. His portfolio's expected return and standard deviation are __________ and __________, respectively. A. 0.087; 0.06 B. 0.295; 0.06 C. None of the options are correct. D. 0.087; 0.12 E. 0.114; 0.12
- 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?A4 a. Suppose we have two risky assets, Stock I and Stock J, and a risk-free asset. Stock I has an expected return of 25% and a beta of 1.5. Stock J has an expected return of 20% and a beta of 0.8. The risk-free asset’s return is 5%. a. Calculate the expected returns and betas on portfolios with x% invested in Stock I and the rest invested in the risk-free asset, where x% = 0%, 50%, 100%, and 150%.The expected return of a portfolio that is totally invested in the risk free asset is caclculated as: E(R) = WA * E(RA) Wf * E(RB) = 0 * 0.16 1.0 * 0.08 = 0 0.08 = 0.08 or 8% Therefore the expected return of a portfolio with risk free asset is 8% There is no standard deviation for the risk free asset. Please full Explain
- What is the beta of a portfolio made up of two risky assets and a risk-free asset? You invest 35% in asset A with a beta of 1.2 and 35% in asset B with a beta of 1.1. Select one: O a. 0.66 O b.1.29 O C. 0.81 O d.1.14 O e. 1.032. Calculate the expected return and expected risk of the portfolio below given the Asset J and Asset K has a correlation coefficient of +0.8. Asset Asset J Asset K Expected Return 8.0% 14.0% Weighting 60% 40% Risk of each asset 12.0% 21.0%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