You are managing a fund with an expected rate of return of 15% and a standard deviation of 27%. The T-bill rate is 3%. Your client chooses to invest 60% of his portfolio in your fund and the rest in a T-bill money market fund. What is the expected return of your client's portfolio? Enter your answer as a decimal number, rounded to three decimal places.
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You are managing a fund with an expected
Your client chooses to invest 60% of his portfolio in your fund and the rest in a T-bill
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- You have just been appointed as a fund manager for Gate Way Fund, of which you will be responsible of a portfolio that consists of two assets. The analysts have provided you with the expected returns and standard deviations of returns of which are listed in the table below: Asset A Asset B Expected Return 7% 11% Standard Deviation 15% 21% Calculate the expected return of the portfolio if half is invested in asset A. If the covariance of the two assets is 28, calculate the correlation coefficient of the portfolio. Calculate the variance of the portfolio if the investments in the two assets classes is equal. Calculate the standard deviation of the portfolio if the assets are equally weighted. The two asset portfolio model can be extended to a portfolio with more assets. Explain the implications of this approach for the understanding of portfolio risk and discuss the practical problems of applying the model in this fashion.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 14% and a standard deviation of 30%. The T-bill rate is 6%. Your client decides to invest in your risky portfolio a proportion (y) of his total investment budget with the remainder in a T-bill money market fund so that his overall portfolio will have an expected rate of return of 13% a. What is the proportion y? (Enter your answer as a decimal number rounded to 2 decimal places.) Proportion y b. What is the standard deviation of the rate of return on your client's portfolio? (Enter your answer as a percentage rounded to two decimal places.) Standard % per year deviation
- You plan to invest in either a mutual fund X or mutual fund Y. The following information about the annual return (%) of each of these investments under different demand levels is available, along with the probability that each of these states of nature will OCcur: Demand Probability Fund X Fund Y High 0.4 30% 25% Medium 0.4 22% 34% low 0.2 17% 25% a) Compute expected return, standard deviation for each investment and covariance of the mutual fund X and mutual fund Y. b) Would you invest in the mutual fund X or Y? Explain. c) If you chose to invest in mutual fund X and the state of nature turns up to be the low demand, what do you think about the possibility of the opportunity loss of 8% in comparison to investing in mutual fund Y?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 0.8. What is the beta of your overall portfolio?Assume 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 % % % %
- Consider the following information and then calculate the required rate of return for the Global Equity Fund, which includes 4 stocks in the portfolio. The market's required rate of return is 10.25%, the risk-free rate is 6.45%, and the Fund's assets are as follows:Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. Stock Investment Beta A $215,000 1.25 B $375,000 0.75 C $575,000 –0.45 D $1,055,000 2.18Suppose that a mutual fund agent approaches you and promote a fund which allows you to withdraw money from your Employment Provident Fund (EPF) to invest. From the analysis of the agent, the fund expected to pay up to 11% return, and you know that EPF paid an average 6% return and treasury’s return fixed at 2.75%. Based on the discussion in this chapter and in your opinion, are you going to take the investment? Justify your answerAn investor is evaluating the historical performance of an investment fund. The following annual returns are provided to the investor: Fund Value Year 0 $120 Year 1 132 Year 2 146 Year 3 133 Year 4 128 Year 5 123 Required: a. Calculate the investment returns for each year. b. Compute the arithmetic mean return. c. Calculate the geometric mean return.
- Suppose you have recently accepted a new job and are setting up your retirement allocations within the firm's 401k plan. The plan options contain two risky mutual funds, A and B. You may assume that all fees are the same across the two funds. Fund A has an expected return of 6% and the standard deviation of returns is 12%. Fund B has an expected return of 7% and the standard deviation of returns is 15%. The correlation between returns on the two funds is 0. The plan also contains a Treasury fund which provides a risk-free return of 3%. A Suppose you can only invest in one of the two risky mutual funds (A or B), but can combine it with the Treasury fund in any proportions you wish. Which of the two mutual funds would you choose and why B Maintaining the restrictions on your investment choices from the last question, what is the best expected return you could achieve if you set up a portfolio with a standard deviation of returns equal to 10%? (Please express your answer in percentage…You have just been appointed as a fund manager for Gate Way Fund, of which you will be responsible of a portfolio that consists of two assets. The analysts have provided you with the expected returns and standard deviations of returns of which are listed in the table below: Asset A Asset B Expected Return 7% 11% Standard Deviation 15% 21% Calculate the standard deviation of the portfolio if the assets are equally weighted. The two asset portfolio model can be extended two a portfolio with more assets. Explain the implications of this approach for the understanding of portfolio risk and discuss the practical problems of applying the model in this fashion.You manage a risky portfolio with an expected rate of return of 10% and a standard deviation of 33%. The T-bill rate is 2%. Your client chooses to invest 75% of a portfolio in your fund and 25% in an essentially risk-free money market fund. What are the expected return and standard deviation of the rate of return on his portfolio? Note: Round your answers to 2 decimal places. Expected return Standard deviation % %