Derive the sharpe ratio of the market portfolio

Assignment Help Business Management
Reference no: EM132956685

Suppose the risk-free rate of return is 0.03. Market porfolio expected return is 0.10 and its risk measured by standard deviation is 0.05.

There are two investors in the economy. Their expected utility functions are given by: Eu=e-s2/ti, fori=1,2, where risk tolerance t1 = 1 and t2 = 0.5.

1. Derive the Sharpe ratio of the market portfolio. Is there a stock in the market that can beat this Sharpe ratio?

2. Derive the two individual investors' portfolios. What are the expected return and risk of each individual investor's choice? Comment.

Reference no: EM132956685

Questions Cloud

Project expected npv assuming average risk : Heywood Diagnostic Enterprises is evaluating a project with the following net cash flows and probabilities (Prob.):
What amount of interest expense recognized by babb trailers : The bond premium or discount is being amortized at rate of $10,000 every six months. The amount of interest expense recognized by Babb Trailers, Inc?
Discuss types of dividend payment : Differentiate the following term: a. Spot market vs. Forward market b. Direct quotation vs. Indirect quotation
Journalize the entry to record the sale : Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank. Round your answers to the nearest cent.
Derive the sharpe ratio of the market portfolio : Suppose the risk-free rate of return is 0.03. Market porfolio expected return is 0.10 and its risk measured by standard deviation is 0.05.
What is the greatest number of equivalent martingale : If we can perfectly hedge, what is the greatest number of Equivalent Martingale Measures there can be?
Provide the journal entry to record the payroll tax expense : Provide the journal entry to record the payroll tax expense for the period. If an amount box does not require an entry, leave it blank.
Discuss cost-volume-profit relationships restaurants should : In today's fast-paced world, new laws and technologies. Discuss the cost-volume-profit relationships restaurants should consider before raising their prices.
Equivalent martingale measure : What happens if an Equivalent Martingale Measure exists in a financial market (regarding arbitrage)?

Reviews

Write a Review

Business Management Questions & Answers

  Roles of the executive sponsor or sponsors in case

-What would be the roles of the executive sponsor or sponsors in this case?

  Shift conversation to focus on warehouse department

Shift the conversation to focus on his warehouse department. You told him a little about supply chain design and how it could improve inventory management.

  Estimating the effort required to perform an activity

Explain the difference between estimating activity duration's and estimating the effort required to perform an activity.

  Draw the context level dfd and zero-level dfd

Draw the Context Level DFD and Zero-Level DFD

  Importance to creating a diverse workforce culture

Describe Dr. Finkelstein's concept of Emotion Tagging as it pertains to decision making and explain its importance to creating a diverse workforce culture.

  Managerial decision making expected value

Managerial Decision Making Expected Value - Prepare an Internet and literature search on the topic of the expected-value decision rule.

  Discuss the operational concerns

Identify and examine as many practical issues, advantages and disadvantages that may be associated with each of the following activities:

  Identify and diagnose a problematic organizational issue

Identify and diagnose a problematic organizational issue that you are aware of or have observed. Describe history of this problem, including roles of any relevant personnel involved. Use fictitious names for individuals to maintain confidentiality.

  Reports vary between levels of management

An example from work would be nice. Otherwise, please clearly explain how the reports vary between levels of management and why.

  How will you maintain consistency

How will you maintain consistency? Describe the quality control procedures you'll use.

  What are the pros and cons of globalization

Globalization is a very complex subject, and it''s not something that''s easily labeled as good or bad. As such, there are many pros and cons, depending on which viewpoint you''re looking at it from. However, I believe that a very important aspect of..

  Contract size of the futures contract

(a) Assuming the contract size of the futures contract is 10 tons per contract;

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd