Computing systematic risk of a portfolio

Reference no: EM13826737

Problem:

Use the following information to answer the questions below.

Security	Return	Standard Deviation	Beta
A	15%	8%	1.2
B	12%	14%	0.9

a. Which of A and B has the least total risk? The least systematic risk?

b. What is the value of systematic risk for a portfolio with 75% of the funds invested in A and 25% of the funds invested in B?

c. Calculate the risk free rate of return and the market risk premium (i.e., Rf and RM - Rf).

d. What is the portfolio expected return and the portfolio beta if you invest 30% in A, 30% in B, and 40% in the risk-free asset? (For questions (d) and (e), assume the risk free rate of return is 5%.)

e. What is the portfolio expected return with 125% invested in A and the remainder in the risk-free asset via borrowing at the risk-free interest rate?

f. What is the beta of the portfolio created in part (e)?

Additional Information:

This question basically belongs to Finance as well as it discusses about computing systematic risk of a portfolio and the expected return from the portfolio. These computations have been presented in the solution.

Reference no: EM13826737

Questions Cloud

Discusses a statement about god creating world and humans : These bit questions related to Religious Studies. The first question discusses a statement about God creating world and humans. The second question discusses about the true nature of human beings to be spiritual

Discuss the role of internet in the lives of consumers : Discuss the Role of Internet in the Lives of Consumers and Businesses

What would be the effect of a rumor about a banking crisis : The question is from economics and it is describe about the Keeping up depositors' confidence is very critical in the banking sector because, it is the depositors who make money available to the banking sector. The rest of the answer is discussed ..

Members of the protestant church : Among the top ten largest "Christian" organized religious bodies in the U.S., there are more members of the Protestant Church than of the Roman Catholic Church

Computing systematic risk of a portfolio : Which of A and B has the least total risk? The least systematic risk?

Report on the importance of relationship management : Report On the Importance of Relationship Management in Business

What are the current trends in the training and development : What are the current trends in the training and development realm. Analyze three to five treads. Describe each tread in a short paragraph.

Expected returns and variance of a portfolio : The expected returns, return variances, and the correlation between the returns of four securities are shown below.

Summarize the data to prepare a visual representation : Explain the steps to consolidate and summarize the data to prepare a visual representation of the results so that they can be presented to the owners

User Account

All Pages