What is the investment proportion

Assignment Help Financial Management

Reference no: EM13933691

Assume that you manage a risky portfolio which consists of Stock A and Stock B in the proportions listed below. Expected Return with an expected rate of return of these stocks are also listed in the table. The T-bill rate is 5%.

Stock A: Proportion in Risky Portfolio: 32% E(R): 10% Standard Deviation: 5%

Stock B: Proportion in Risky Portfolio: 68% E(R): 20% Standard Deviation: 8%

ρAB=0.1

A client prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio subject to the constraint that the overall portfolio's standard deviation will not exceed 20%.

a. What is the investment proportion, y?

b. What is the expected rate of return on the overall portfolio?

Reference no: EM13933691

Questions Cloud

Develop your skills to contribute to the body of knowledge : There are two components to the individual assessment. The first component is to write either a briefing paper (for the board and senior management), a blog or a journal article. The second component is to anonymously review at least two individua..

About the shares of common stock outstanding : Dinklage Corp. has 10 million shares of common stock outstanding. The current share price is $82, and the book value per share is $5. The company also has two bond issues outstanding. Suppose the most recent dividend was $5.40 and the dividend growth..

What is the cross-elasticity of demand : What is the cross-elasticity of demand for courses at universities that did not increase their fees with respect to the price of courses at universities that did increase their fees?

Analyse package using principles of contract law : 1. Identify the key information about the holiday as set out in brochure. 2. Critically analyse the package using the principles of contract law found in case law and categorise the statements into representations, terms, conditions and warranties.

What is the investment proportion : Assume that you manage a risky portfolio which consists of Stock A and Stock B in the proportions listed below. Expected Return with an expected rate of return of these stocks are also listed in the table. The T-bill rate is 5%. What is the expected ..

Descriptive analysis of the two variables : Provide a descriptive analysis of the two variables (e.g., mean, standard deviation, minimum and maximum).

Is there negative consequences for an individual : Given the fact that adolescents are primarily working to emerge as individuals, in what ways might an older relative or concerned adult approach a younger adult to be encouraging and helpful, and have the young adult be receptive?

Common law and statutory rules of interpretation : Explain how the common law and statutory rules of interpretation could be applied to the following situations;

What percentage did builder increase magnitude of force : By what percentage n did the builder increase the magnitude of the force exerted on the gutter at A over that figured by the architect? The chain weighs 100 N per meter of its length.

User Account

All Pages