What is the reward-to-variability ratio of the portfolio

Assignment Help Financial Management

Reference no: EM131320508

1. An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 16% and a standard deviation of return of 20.0%. Stock B has an expected return of 12% and a standard deviation of return of 5%. The correlation coefficient between the returns of A and B is 0.50. The risk-free rate of return is 8%. The proportion of the optimal risky portfolio that should be invested in stock A is _________.

2. An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 18% and a standard deviation of return of 31%. Stock B has an expected return of 13% and a standard deviation of return of 16%. The correlation coefficient between the returns of A and B is .5. The risk-free rate of return is 6%. The proportion of the optimal risky portfolio that should be invested in stock B is approximately _________.

3. The expected return of a portfolio is 9.9%, and the risk-free rate is 5%. If the portfolio standard deviation is 13%, what is the reward-to-variability ratio of the portfolio?

Reference no: EM131320508

Questions Cloud

Annualized effective cost of missing trade credit discount : Assume an opportunity cost of 10%, what should you do under the trade credit terms, 2/10, net 45? If the annualized effective cost of missing the trade credit discount is 15.05%, the length of discount period is 15 days, and the length of the net-tra..

What is present value savings that would be earned : Your firm just purchased $100,000 in goods from your supplier on trade credit terms of 2/10 net 30. Your opportunity cost of funds is 9%. What is the present value savings that would be earned if your firm makes the payment on the last day of the dis..

Global reporting initiative performance indicators : Review the Global Reporting Initiative performance indicators in Table 12.10. How would a company measure its progress in these areas? Propose both quantitative and qualitative measures.

What price would you expect six-month maturity treasury bill : Suppose investors can earn a return of 1.7% per 6 months on a Treasury note with 6 months remaining until maturity. The face value of the T-bill is $10,000. What price would you expect a 6-month maturity Treasury bill to sell for?

What is the reward-to-variability ratio of the portfolio : An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 16% and a standard deviation of return of 20.0%. Stock B has an expected return of 12% and a standard deviation of return of 5%. The expected ret..

The standard deviation of return on investment : The standard deviation of return on investment A is .30, while the standard deviation of return on investment B is .25. If the correlation coefficient between the returns on A and B is −.240, the covariance of returns on A and B is _________. The sta..

Firm has just announced that because of new joint venture : Consider a firm that had been priced using a 12.5 percent growth rate and a 14.5 percent required return. The firm recently paid a $2.20 dividend. The firm has just announced that because of a new joint venture, it will likely grow at a 13.0 percent ..

Relationships applies to a par value bond : Which one of the following relationships applies to a par value bond?

Discount rate is appropriate for this stock : A fast-growing firm recently paid a dividend of $0.20 per share. The dividend is expected to increase at a 20 percent rate for the next three years. Afterwards, a more stable 11 percent growth rate can be assumed. If a 12 percent discount rate is app..

User Account

All Pages