Adequate information: Expected rate of return of risky asset =18% Standard deviation of the risky asset=28% T-bill rate is 8% Client wants to invest in your portfolio in the proportion Y Overall portfolio’s expected rate of return =16% To compute: The proportion of Y Introduction: Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

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Answer 1

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

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Consider the following information about a risky portfolio that youmanage, and a risk-free asset: E(rP ) = 11%, σP = 15%, rf = 5%.a) Your client wants to invest a proportion of her total investment budget in your riskyfund to provide an expected rate of return on her overall or complete portfolio equal to8%. What proportion should she invest in the risky portfolio, P, and what proportionin the risk-free asset? b) What will be the standard deviation of the rate of return on her portfolio? c) Another client wants the highest return possible subject to the constraint that you limithis standard deviation to be no more than 12%. Which client is more risk averse?

Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rp) = 9%, Op = 24%, rf = 2%. Required: a. Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 8%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk-free asset? b. What will be the standard deviation of the rate of return on her portfolio? c. Another client wants the highest return possible subject to the constraint that you limit his standard deviation to be no more than 12%. Which client is more risk averse?

Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rp) = 8%, op = 15%, rf = 2%. Required: a. Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 8%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk-free asset? b. What will be the standard deviation of the rate of return on her portfolio? c. Another client wants the highest return possible subject to the constraint that you limit his standard deviation to be no more than 12%. Which client is more risk averse? Complete this question by entering your answers in the tabs below. Required A Required B Required C Risky portfolio Risk-free asset Answer is complete but not entirely correct. Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall…

Answer 2

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

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Answer 3

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

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Answer 4

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

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Answer 5

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 6

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 7

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 8

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 9

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 10

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 11

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 6.A - Prob. 1P Ch. 6.A - Prob. 2P Ch. 6 - Prob. 1PS Ch. 6 - Prob. 2PS Ch. 6 - Prob. 3PS Ch. 6 - Prob. 4PS Ch. 6 - Prob. 5PS Ch. 6 - Prob. 6PS Ch. 6 - Prob. 7PS Ch. 6 - Prob. 8PS

Solution Summary: The author explains how to calculate the proportion of Y by dividing each item of the stock position’s cash value by the complete or total portfolio value.

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