User Account

All Pages

Expected return and standard deviation of market portfolio

Assignment Help Finance Basics
Reference no: EM133116775

In a hypothetical world of a risk-free asset Rf and three risky assets A, B, and C. Suppose the CAPM holds. Answer the required questions with the information about A, B, C, and the market portfolio (M) constructed using them provided in the table below.

 

Asset A

Asset B

Asset C

Expected return

10%

14%

11%

Standard deviation

15%

20%

16%

Assets' Weights of the Market Portfolio (M)

25.34%

37.29%

37.37%

Correlation matrix

Asset A

Asset B

Asset C

Asset A

1

 

 

Asset B

0.4

1

 

Asset C

0.2

0.3

1

QUESTIONS

  1. Calculate the expected return and standard deviation of the market portfolio (M).
  2. Calculate the covariances of Asset A, B, C, with the market portfolio (M), respectively. That is, COV(A, M) and COV(B, M). 

Reference no: EM133116775

Questions Cloud

Value impact of acquisition announcement : On Monday 2 Aug 2021, Afterpay and Square announced that Square has agreed to acquire all the issued shares in Afterpay and announced the acquisition agreement.
How might the information or lack of information change : Does the board need to know that information? How might the information or lack of information change the outcome of the board decisions
Design process to build interactive dashboards : Discuss and critically apply the basic principles to data visualisation techniques and evaluate critically data visualisation using appropriate software tools
Is there an alternative that will satisfy glades : The Glades Corporation has located a building that it would like to have for its new warehouse. Is there an alternative that will satisfy Glades
Expected return and standard deviation of market portfolio : Answer the required questions with the information about A, B, C, and the market portfolio (M) constructed using them provided in the table below.
Explain in detail how wells might respond to risks : Explain in detail how Wells might respond to risks of material misstatement of the financial statements due to fraud
What amount of liability would the company report : The Price is Right manufactures electronic systems. What amount of liability would the company report on its statement of financial position
Project versus the maximum possible npv : Langton Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable.
Start-up computer software development firm : Lanni Products is a start-up computer software development firm. It currently owns computer equipment worth $30,000 and has cash on hand of $20,000 contributed

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the firm market value

What is the firm's market value? Show your answer to the nearest $1. Do not use commas or the $ sign in your answer.

  What is the recovery ratio on this underlying loan

After 1 year, firm C bankrupts and is able to provide $20.0 million to settle the debt with Bank A. What is the recovery ratio on this underlying loan?

  Assume a stock is initially priced at 50 and pays an annual

assume a stock is initially priced at 50 and pays an annual 1 dividend. an investor uses cash to pay 25 a share and

  Profile change depending on the state of the economy

How does your saving and spending profile change depending on the state of the economy, i.e., whether the economy is in a recession versus expansion?

  What are the growth prospects for company

a) In this case, what are the growth prospects for your company, all other things being equal?

  What is the required rate of return

ABC just paid a dividend of $4.45 per share. Dividends are paid annually.

  Estimate the net present value of the project

You are helping a manufacturing firm decide whether it should invest in a new plant. The initial investment is expected to be $ 50 million.

  What is the interest rate on synthetic loan

Assuming that there are no transaction costs, how could you synthetically borrow ¥100,000? What is the interest rate on your synthetic loan?

  Analyze the current facility location

Analyze the current facility location, and then use the three-step procedure to determine a new location. Analyze the key concepts related to capacity planning and facility location for the new location.

  What is the npv of the project

a. What is the NPV of the project? b. What is the IRR for the project? c. Do we Accept the project? Why or why not?

  Which security do mmfs invest in most often

How do money market funds differ from other types of mutual funds in terms of how they use the money invested by shareholders?

  Effective cost of funds

A business intends to use 90-day bank-accepted bill futures to hedge the interest rate risk resulting from its plans to borrow approximately $5 million using th

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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