Question: Assume you have all your wealth a million dollars invested
Assume you have all your wealth (a million dollars) invested in the Vanguard 500 index fund, and that you expect to earn an annual return of 12%, with a standard deviation in returns of 25%. Since you have become more risk averse, you decide to shift $ 200,000 from the Vanguard 500 index fund to treasury bills. The T-bill rate is 5%. Estimate the expected return and standard deviation of your new portfolio.
Relevant QuestionsEvery investor in the capital asset pricing model owns a combination of the market portfolio and a riskless asset. Assume that the standard deviation of the market portfolio is 30% and that the expected return on the ...Unicom is a regulated utility serving Northern Illinois. The following table lists the stock prices and dividends on Unicom from 1989 to 1998. a. Estimate the average annual return you would have made on your investment. b. ...A prominent beta estimation service reports the beta of Comcast Corporation, a major cable TV operator, to be 1.45. The service claims to use weekly returns on the stock over the prior five years and the NYSE composite as ...You are trying to estimate the beta of a private firm that manufactures home appliances. You have managed to obtain betas for publicly traded firms that also manufacture home appliances. The private firm has a debt equity ...Safecorp, which owns and operates grocery stores across the United States, currently has $50 million in debt and $100 million in equity outstanding. Its stock has a beta of 1.2. It is planning a leveraged buyout, where it ...
Post your question