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What is the mean of the minimum variance portfolio

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Reference no: EM132910773

You are a Morgan Stanley portfolio manager of a risky portfolio with an expected rate of return of 17% and a standard deviation of 28%. The T-bill rate is 4%. Suppose your client decides to invest in your risky portfolio a proportion (y) of his total investment budget so that his overall portfolio will have an expected return of 10%.

Please choose all correct answers related to the following quesitons.

a) What is the mean of the minimum variance portfolio?

b) What is the standard deviation of the minimum variance portfolio?

c) What is the Sharpe ratio of the minimum variance portfolio?

d) Suppose your client is wondering if he should switch his money in your fund to a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 9% with a standard deviation of 25%. Show your client the maximum fee you could charge (as a percent of the investment in your fund deducted at the end of the year) that would still leave him at least as well off investing in your fund as in the passive one. (Hint: The fee will lower the slope of your client's CAL by reducing the expected return net of the fee.) at is the minimum-variance portfolio proportion in stock fund?

Please choose all correct answers.

1.The answer to part d is 8.4%
2.The answer to part a is 66.15%
3.the answer to part c is 42.8%
4.the answer to part c is 56.43%
5.The answer to part a is 50%
6.The answer to part b is 14.92%
7.The answer to part b is 14%
8.The answer to part d is 7.4%
9.The answer to part b is 12.92%
10.The answer to part a is 46.15%
11.the answer to part c is 46.43%
12.The answer to part d is 6.4%

Reference no: EM132910773

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