We consider a market with 1 riskfree asset and N risky assets. The following tables show theinvestment goal of three different investors:Investor AInvestor BInvestor CYou are given that● Expected return μp ≥ 0.2Standard deviation of return op ≤ 0.2● Expected return μp ≥ 0.15● Standard deviation of return op ≤ 0.12Expected return µp ≥ 0.1● Standard deviation of return op ≤ 0.15●Investment goals●Exactly 1 of the above investment goals is infeasible.The return rate of riskfree asset is rf = 0.05.Assuming that the tangency portfolio exists and is efficient(b) An investor is seeking for the minimum variance portfolio with expected return up =0.17. He chooses a portfolio consisting of these assets (riskfree and risky assets). It isfound that the expected return and standard deviation of return of this portfolio areMp = 0.17 and op = 0.2. Determine if it is the desired portfolio.

To determine if the portfolio chosen by the investor is the desired portfolio, we need to check if…

Answered: We consider a market with 1 riskfree…

Calculus For The Life Sciences

2nd Edition

ISBN:9780321964038

Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.

Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.

Chapter13: Probability And Calculus

Section13.2: Expected Value And Variance Of Continuous Random Variables

Problem 10E

See similar textbooks

Similar questions

The Duff brewery changes the set of prizes, which are now monetary: X = {0, 10, 20}. There are three lotteries: 5 3 4 9. 12' 12' 12, 2 1 and r = 4 3 p = 12' 12' 12), q = 12' 12' 12,
According to the JPM Riskmetrics analysis report, the return on a UK-based portfolio is bigger than +2% on average. You collect a sample of 20 observations on past returns on the portfolio (all assets in the portfolio are equally weighted and the weights are unchanged over time). The sample mean is 2.03% and the sample variance is 1%. Is the claim made by JPM supported by the data? Make sure to state any assumptions you need to address this question.
The lowest portfolio risk will result when the asset returns are perfectly positively correlated. Select one: True False
Consider two assets, X and Y, with expected returns X = 14.5% and Y = 13.8% and with standard deviations X = 6.3% and Y = 6.7% for those returns. The two assets have a correlation, of -0.6. a. What is the covariance of the returns of stocks X and Y? In general, will constructing a portfolio from these two stocks reduce or increase the risk compared to the individual stocks? Briefly explain. b. What is the expected return and standard deviation of a portfolio made up of stocks X and Y which is 25% stock X (the remainder stock Y)? c. What is the expected return and standard deviation of a portfolio made up of stocks X and Y which is 50% stock X (the remainder stock Y)? *NOTE-show work/formulas used in EXCEL
Black Water CO(BWO) TATA Steel (TATA) 1.Estimate the average daily return of each fund using the arithmetic average method. (EXCEL) Below are the historical closing prices for the two funds above. 2. Calculate the standard deviation of each fund (EXCEL) Date BWO TATA 3. Calculate the correlation between the two funds 10/20/2016 113.3374 113.6971 4. Calculate the covariance between the two funds using a) Excel function, Covariance.S 10/21/2016 113.7611 113.6408 and b) using formula (Correlation multiplied by standard deviations of both funds. 10/24/2016 115.1283 114.3635 10/25/2016 114.7624 113.5094 10/26/2016 113.9825 112.383 10/27/2016 113.4626 111.0971 10/28/2016 112.7501 110.7873 10/31/2016 112.6442 111.2285 11/1/2016 111.7969 109.8675 11/2/2016 110.9014 108.4689 11/3/2016 109.8134 107.9433 11/4/2016 109.4282 108.6379 11/7/2016 112.0279 111.2942 11/8/2016 112.7597 111.5852 11/9/2016 113.2797 115.0206 11/10/2016 111.4502 116.8603 11/11/2016 111.4984 119.5448
A construction company renovates old homes at Garden East in Karachi. Over the time, the company has found that its rupee volume of renovation work is dependent on the area’s payroll. The figures for the company’s revenues and the amount of money earned by wage earners in the area for the past six years are presented in Table 3. If the payroll for next year is expected to be PKR 600 thousand, then what is the predicted value for the company’s sales (include error of prediction in your answer)? Do this for all prediction models. Local Payroll (PKR 100,000/=) Company’s sales (PKR 100,000/=) 3 6 4 8 6 9 4 5 2 4.5 5 9.5 ii) If in part a (above), if we add another input variable along with Local Payroll, then we will obtain a multiple regression model for predicting Company’s sales. How should the correlation between the…
The standard deviation of return on investment A is 19%, while the standard deviation of return on investment B is 14%. If the covariance of returns on A and B is 0.004, the correlation coefficient between the returns on A and B is 50 2 of 30 Next >
Suppose you have the following inputs: • TSX/S&P Return = 20 • MSCI –World Index Return =18 • Variance of the Canadian index =30 • Variance of the World index = 26 • Correlation coefficient p = .60 • Risk free = 2 Assume that the weight on the optimal portfolio is .554 for the TSX. And that the standard deviation of the optimal portfolio is 4.76. What is the expected return on the optimal international portfolio made up of the two indices? (Closest to) A. 19.11% B. 15.84% C. 16.22% D. 21.22% Reset Selection
tion 21. An investor is considering two types of investment. She is quite satisfied that the expected return on investment 1 is higher than the expected return on investment 2. However, she is quite concerned that the risk associated with investment 1 is higher than that of investment 2. To help make her decision, she randomly selects seven monthly returns on investment 1 and ten monthly returns on investment 2. She finds that the sample variances of investments 1 and 2 are 225 and 118, respectively. a) Can she infer at the 5% significance level that the population variance of investment 1 exceeds that of investment 2? b) Estimate with 95% confidence the ratio of the two population variances. c) Briefly describe what the interval estimate tells you.
The expected value of an unbiased estimator is equal to the parameter whose value is being estimated. True False
A certain large asset management company is thought to have a high value client base of 35%. High value dlients are those with a portfolio which is worth more than a certain benchmark amount. The new CEO of this company believes that the proportion of high value clients has significantly changed in recent years and sets out to prove his theory. He finds that only 320 of a thousand client portfolios are high value. Is there enough statistical evidence to conclude that the proportion of high value clients has decreased? The test statistic value for this test (correct to 2 decimal places) is and the p-value (correct to 2 decimal places) is

Recommended textbooks for you

Calculus For The Life Sciences

Calculus

ISBN:

9780321964038

Author:

GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.

Publisher:

Pearson Addison Wesley,

Calculus For The Life Sciences

Calculus

ISBN:

9780321964038

Author:

GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.

Publisher:

Pearson Addison Wesley,

SEE MORE TEXTBOOKS