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An investor wants to form a two asset portfolio consisting of Treasury bills with a return of 1.5% and a risky portfolio with a risk premium of 12.7% and a standard deviation of 22%. The investor wants the standard deviation of the two asset portfolio to be no more than 15%.
a. What fraction y of the investor’s funds should be invested in the risky portfolio?
b. What is the expected return of the two asset portfolio?
Determine two to three methods of using stocks and options to create a risk-free hedge portfolio can be created. Support your answer with examples of these methods being used to create a risk-free hedge portfolio.
Given this initial weighting what is the standard deviation of the portfolio? What would be the weights of the minimum variance portfolio? What is the expected return of the minimum variance portfolio?
How much of the riskiest security should you sell and replace with risk-free securities
Make a graph with variable (a) on the horizontal axis and variable (b) on the vertical axis and plot each country. What might explain the relationship between these variables?
You can acquire convertible bonds from a rapidly growing company or from a utility. Speculate on which convertible bond would have the lower yield and discuss the reason for this difference.
Compute Shamrock's ROE directly. Confirm this using the three components. Using the ROE computed in Part a, what is the expected sustainable growth rate for Shamrock?
Explain how diversification can reduce the risk of a portfolio of assets to below the weighted average of the risk of the individual assets.
Determine the financing portfolio composition for Kent's southern branch that would minimize the expected effective financing rate while satisfying the restriction imposed by the parent.
What should the strike prices of the put options be? Assume that the risk-free rate is 10% and the dividend yield on both the portfolio and the index is 2%.
Calculate (1) the overall return to the benchmark portfolio, (2) the overall return to Manager A's actual portfolio, and (3) the overall return to Manager B's actual portfolio.
Calculate the six-month horizon return (in percent) for each bond, if the actual EBR bond price equals 105.55 and the actual CRR bond price equals 104.15 at the end of six months.
Calculate all the implied forward rates beginning after 6 months up till 24 months. Calculate the current value of Collin's bond portfolio. Calculate the duration of each of the bonds A, B, C and D
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