Determine the composition of the efficient portfolio

Assignment Help Finance Basics
Reference no: EM131962941

Question: You are a financial advisor. A client approaches you for advice. The client has constructed his own portfolio and it has an expected return of 8% per annum and an annual return standard deviation of 10%. You know that the market portfolio has a mean return of 15% per year and a return standard deviation of 20%. The annual risk-free rate is 5%. Demonstrate to the client, using a picture, that he can build an efficient portfolio which has identical return volatility to his current portfolio but which has superior expected return. Be sure to explain the shape and position of all of the elements of your picture. Determine the composition of this efficient portfolio and compute its expected return.

Reference no: EM131962941

Questions Cloud

Guidelines for power writing : What are some guidelines for power writing, and why are they important?
What will johnsons incremental return on average investment : Johnson Electronics is considering extending trade credit to some customers previously considered poor risks.
What does the mean for the future of entrepreneurship : How have the costs of entrepreneurship changes in the past decade? Why? What forces are behind these changes? What does this mean for the future.
Results of an evaluation frequently problematic : Why is generalizing the results of an evaluation frequently problematic, and how might you enhance the likelihood of generalizability of results?
Determine the composition of the efficient portfolio : You are a financial advisor. A client approaches you for advice. The client has constructed his own portfolio and it has an expected return of 8% per annum.
Explain any contract doctrines which may apply : John plans to sell $10,000 worth of his headphones to one (1) buyer (the XYZ Store chain) for resale purposes.
How much will jon need at retirement to pay for houseboat : How much will Jon need at retirement to pay for the houseboat and to provide his desired yearly income of $150,000/year? Round to the nearest whole dollar.
Calculate the before-tax and after-tax irr : A new machine is estimated to cost $200,000 and reduce net annual operating expenses by $36,000 for 10 years and have a market value of $30,000.
What is the role of environment in infectious disease : What is the role of environment in infectious disease? Provide at least two examples of how environment impacts infectious disease in a community.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial management the blake manufacturing corporation

the blake manufacturing corporation manufactures and sells folding umbrellas. the corporations condensed income

  What is the expected growth rate of kj dividend

a) What is the expected Growth Rate of KJ's dividend? b) What is KJ's current stock price?

  How would the payment differ if you paid interest only

Future Value: Compute the future value in year 9 of a $2,000 deposit in year 1 and another $1,500 deposit at the end of year 3 using a 10 percent interest rate.

  Calculate cash flows from operating activities

Below are cash transactions for Goldman Incorporated, which provides consulting services related to mining of precious metals.

  How much does the development office need

"The Agnew Chair in Fungus Studies," which will contribute $1 million per year, in perpetuity, to the biology department. Assuming an interest rate of 8 percent, how much does the Development Office need to ask for up front?

  Determine the three most prevalent methods of financing

Determine the three most prevalent methods of financing that exist in your local justice system. Discuss how these methods of funding create value for the organization and the society that it serves.

  Select a fortune 500 company from the manufacturing sector

select a fortune 500 company from the manufacturing sector. examine the 2 previous years financial data and create a

  How much more interest will pay over the life of the loan

A borrows $20,000 for 8 years and repays the loan with level annual payments at the end of each year. B also borrows $20,000 for 8 years but pays only interest.

  A vacuum oven for brazing small fittings

Emma runs a small factory that needs a vacuum oven for brazing small fittings. She can purchase the model she needs for $180,000 up front, or she can lease it for $4,200 per month. She can borrow at 7% APR, compounded monthly. Assuming that th..

  At what share price will you receive a margin call

The stock of KICK industries is trading @ $39. you feel the stock price will decline, so you short 500 shares at an initial Margin of 50%.

  Determine the amount of taxes for the given situations

Using the tax table in Exhibit, determine the amount of taxes for the following situations: A head of household with taxable income of $97,525.

  A bond that pays interest annually yields a rate of return

a bond that pays interest annually yields a rate of return of 7.75 percent. the inflation rate for the same period is 4

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