A universe of securities includes a risky stock (X), a stock-index fund (M), and T-bills. The...
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A universe of securities includes a risky stock (X), a stock-index fund (M), and T-bills. The data for the universe are: X M T-bills Expected Return 15% 10 5 Standard Deviation 50% 20 O The correlation coefficient between X and M is -.2. a. Draw the opportunity set of securities X and M. b. Find the optimal risky portfolio (O), its expected return, standard deviation, and Sharpe ratio. Compare with the Sharpe ratios of X and M, each taken individually. c. Find the slope of the CAL generated by T-bills and portfolio O. d. Suppose an investor places 2/9 (i.e., 22.22%) of the complete portfolio in the risky portfolio O and the remainder in T-bills. Calculate the composition of the complete portfolio, its expected return, standard deviation, and Sharpe ratio. A universe of securities includes a risky stock (X), a stock-index fund (M), and T-bills. The data for the universe are: X M T-bills Expected Return 15% 10 5 Standard Deviation 50% 20 O The correlation coefficient between X and M is -.2. a. Draw the opportunity set of securities X and M. b. Find the optimal risky portfolio (O), its expected return, standard deviation, and Sharpe ratio. Compare with the Sharpe ratios of X and M, each taken individually. c. Find the slope of the CAL generated by T-bills and portfolio O. d. Suppose an investor places 2/9 (i.e., 22.22%) of the complete portfolio in the risky portfolio O and the remainder in T-bills. Calculate the composition of the complete portfolio, its expected return, standard deviation, and Sharpe ratio.
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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