Would you invest in this portfolio

Assignment Help Financial Management

Reference no: EM132008552

Suppose you are a head of a hedge fund and are thinking to create a portfolio investing just in these three stocks.

The portfolio weights, volatility and correlation with the market portfolio of the three stocks are given in the table below:

Portfolio weight Volatility Correlation with the market portfolio Yahoo 0.25 12% 0.4 Microsoft 0.35 25% 0.6 Google 0.4 13% 0.5

1. If you expect to receive a rate of return 9% on this portfolio , would you invest in this portfolio? Explain?

2. Assume the CAPM correctly prices risk, is the market portfolio efficient? Explain why.

The volatility of the market portfolio is 10% and is has an expect return of 8%.. The risk free rate is 3%

Reference no: EM132008552

Questions Cloud

What is the purpose of the indenture : What is the purpose of the indenture? How do I identify sources of risk to the bondholder?

How much income should peck report in year : On December 1, year 1, Peck Advertising receives a $24,000 retainer fee for a two-year service contract. How much income should Peck report in year 1

Estimate the beta of the portfolio : If the standard deviation of your portfolio was 42% and the standard deviation of the market was 18%, what would be your estimate of the beta of the portfolio?

Topic related to employee references : What happened recently about the topic related to employee references? What can be the current events on employee reference?

Would you invest in this portfolio : f you expect to receive a rate of return 9% on this portfolio , would you invest in this portfolio? Explain?

Variety of incentives to encourage fdi inflows : Host countries can offer a variety of incentives to encourage FDI inflows - do these offer an unfair advantage?

Low-skilled minimum-wage employees : What are the challenges in motivating a) professionals and b) low-skilled minimum-wage employees?

Estimate what will be the firms cash cycle : Assuming that all of Freddie's sales are on credit, what will be the firm's cash cycle? (Round your answer to 2 decimal places.)

How will the sale of Activity D affect Sarah taxable income : Activity D, which had been profitable until last year, had a current loss of $1,500. How will the sale of Activity D affect Sarah's taxable income

User Account

All Pages