What is the expected return on the optimal risky portfolio

Assignment Help Financial Management
Reference no: EM131985308

An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 21% and a standard deviation of return of 39%. Stock B has an expected return of 14% and a standard deviation of return of 20%. The correlation coefficient between the returns of A and B is .4. The risk-free rate of return is 5%. What is the expected return on the optimal risky portfolio is approximately? (Hint: Find weights first.)

Please show all work and final answer, 

Reference no: EM131985308

Questions Cloud

What is the present value of winnings : If the appropriate interest rate is 6.3 percent, what is the present value of your winnings?
What is the maximum amount your scholarship : What is the maximum amount your scholarship will be able to pay out each year?
How many months will it be before he pays off debt : If Simon makes monthly payments of $60, how many months will it be before he pays off the debt?
Company be indifferent between accepting-rejecting project : At what discount rate would the company be indifferent between accepting or rejecting the project?
What is the expected return on the optimal risky portfolio : What is the expected return on the optimal risky portfolio is approximately?
The correlation coefficient between the returns : If the variance of return on the portfolio is .0380, the correlation coefficient between the returns on A and B is ________.
Standard deviation of return on risky portfolio : The risk-free rate, as well as investor's borrowing rate is 10%. The standard deviation of return on risky portfolio is 20%
Calculate the present value of the cash inflows of project : If the company requires a return of 10 percent for such an investment, calculate the present value of the cash inflows of the project.
What is the price of the security : What is the price of the security if the APR is 6.1 percent, compounded quarterly?

Reviews

Write a Review

Financial Management Questions & Answers

  Install panels based solely on financial considerations

CFS is considering applying for a stimulus funding grant that would allow it to install solar panels on each of its four fire houses. The roofs on each of the firehouses are big enough to accommodate 30,000 square feet of panels. Panels cost $8 per s..

  Equity investors-long-term creditors-short-term creditors

Financial ratio analysis is conducted by managers, equity investors, long-term creditors, and short-term creditors. What is the primary emphasis of each of these groups in evaluating ratios?

  Calculate lissa total dividends

a. Calculate Lissa's total dividends for 2014 if its dividend payment is set to force dividends to grow at the long-run growth rate in earnings. b. Calculate Lissa's total dividends for 2014 if it continues its 2013 dividend payout ratio.

  Compute annuity that will make investment worthwhile

The company is willing to accept any project that will earn 10% per year or more, on all invested capital. Compute annuity that will make investment worthwhile.

  The current price of the bond is

Johnson construction inc. has issued 20 years $1000 face value, 8% annual coupon bonds with a yield to maturity of 10%. the current price of the bond is?

  Discuss the need for working capital

discuss the need for working capital to include 2 months of startup drug inventory, personnel costs including salaries and benefits.

  Value is based on expected future cash flows is determined

How the value of any asset whose value is based on expected future cash flows is determined.

  Explain the concept of contingency perspective leadership

Explain the concept of contingency perspective leadership and provide some examples.

  Make you indifferent between buying and leasing

After deciding you want a new car, you can either lease the car or purchase it with a four-year loan. The car you want costs $37,000. The dealer has a special leasing arrangement where you pay $103 today and $503 per month for the next four years. Wh..

  Compute the amount that couple deposited into account

Compute the amount that the couple deposited into the account when they opened it

  What will size of prepayment if conditional prepayment rate

What will be the size of the prepayment if conditional prepayment rate is 8% for an investor who owns a pass-through security in which the remaining mortgage balance at the beginning of some month is $90 million and the scheduled principal payment is..

  Can financial system exist without the concept of interest

Can a financial system exist without the concept of interest? Why? What are the factors that underlie interest rate changes? Why?

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