Consider two risky assets: X and Y. their expected returns are 5% and 12%, respectively. In...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider two risky assets: X and Y. their expected returns are 5% and 12%, respectively. In addition, their covariance matrix and inverse of covariance matrix are [10.61 1.36 0.10 -0.045] -0.045 0.35 respectively. Suppose the risk-free rate is 1.36 3.03 K= and K-¹ = " 1%. 4.1 What are the optimal weights of the two assets for the efficient portfolio earning 7% return and what is its risk? (5 points) 4.2 What are the optimal weights of the two assets and the risk-free asset for the efficient portfolio earning 7% return and what is its risk? (4 points) 4.3 What are the implications from 4.1 and 4.2? (1 points) Consider two risky assets: X and Y. their expected returns are 5% and 12%, respectively. In addition, their covariance matrix and inverse of covariance matrix are [10.61 1.36 0.10 -0.045] -0.045 0.35 respectively. Suppose the risk-free rate is 1.36 3.03 K= and K-¹ = " 1%. 4.1 What are the optimal weights of the two assets for the efficient portfolio earning 7% return and what is its risk? (5 points) 4.2 What are the optimal weights of the two assets and the risk-free asset for the efficient portfolio earning 7% return and what is its risk? (4 points) 4.3 What are the implications from 4.1 and 4.2? (1 points)
Expert Answer:
Answer rating: 100% (QA)
41The optimal weights of the two assets for the efficient portfolio earning 7 return are 05 and 05 respectively The risk of the efficient portfolio is ... View the full answer
Related Book For
Financial Accounting an introduction to concepts, methods and uses
ISBN: 978-0324789003
13th Edition
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis
Posted Date:
Students also viewed these accounting questions
-
Cronah has the following normal account balances: contributed capital, $1,000,000; accounts payable, $14,000; property, plant and equipment, $100,000; revenue, 500,000; wage expense, $10,000;...
-
If financial markets are efficient, those who invest in the relevant markets can expect to: Select one option a) generally achieve a return corresponding to a positive NPV b) can create opportunities...
-
Why may net cash flow from operating activities on the cash flow statement be different from the amount of net income reported on the income statement?
-
For the following exercises, find the inverse of the functions. f(x): || 3 x-4
-
If a companys order-winning criteria involve increased flexibility and greater product variety, is the company more likely to employ a make-to-stock or a make-to-order finished goods inventory...
-
Colleen Fernandez, president of Rhino Enterprises, applied for a $175,000 loan from First Federal Bank. The bank requested financial statements from Rhino Enterprises as a basis for granting the...
-
On November 5, 2020, a Dunn Corporation truck was in an accident with an auto driven by R. Bell. Dunn received notice on January 12, 2021, of a lawsuit for \(\$ 350,000\) in damages for personal...
-
Central Station Fund. The Town of Elizabeth operates the old train station as an enterprise fund. The train station is on the national register of historic buildings. Since the town has held the...
-
(8-12) Constant Growth Valuation What must be a company's dividend growth rate for its stock to have an expected value of $13.25, assuming its most recently paid dividend was $0.50 and the stock's...
-
Pam Corporation purchased 75 percent of the outstanding voting stock of Sun Corporation for $4,800,000 on January 1, 2016. Sun's stockholders' equity on this date consisted of the following (in...
-
Please prepare the income statement from trial balance below and also a balance sheet (please ignore that is does not balance). 244 501 Acc. No. Account 201 Accounts Payable 102 Accounts receivable...
-
Write select statement to create the inner join of tables sec1310_table1 and sec1310_table2 . The join condition should say that the first three columns of these tables are equal. Write select...
-
Futura Company purchases 6 3 , 0 0 0 starters from a supplier at $ 1 2 . 0 0 per unit that it installs in farm tractors. Due to a reduction in output, the company now has enough idle capacity to...
-
Where are variable costs and revenues budgeted to be different at each activity level?
-
Carry out a mini-research and share with the class any interesting article that you have seen or read about that is related to careers or latest trends and technology in the Database Industry. Be...
-
There are no results for At December 31, 2021, the general ledger and subsidiary ledger for Wow's, a small beauty supply company, showed the following: General Ledger Accounts Receivable Subsidiary...
-
Pittman Company is a small but growing manufacturer oftelecommunications equipment. The company has no sales force of itsown; rather, it relies completely on independent sales agents tomarket its p 2...
-
4. Jobe dy -Y 2 et by
-
When the total amount of cash that a firm expects to collect from a customer is highly uncertain, the cost recovery method seems more appropriate than the installment method. Explain.
-
Compare and contrast a stock option. a stock right, and a stock warrant. How does the accounting for these three differ?
-
Preparing a statement of cash flows. (Adapted from CPA examination.) The management of Warren Corporation, concerned over a decrease in cash, provides you with the comparative analysis of changes in...
-
Question: Kathleen Carroll, a single woman, applied for an Exxon credit card. Exxon rejected her application without giving any specific reason and without providing the name of the credit bureau it...
-
Question: In August, Ethel Jenkins went to First American Mortgage and Loan Association of Virginia (the Bank) to sign a second mortgage on her home. Her first mortgage was with a different bank. She...
-
Question: Joel Curtis was two years old and his brother, Joshua, was three years old when their father left both children asleep in the rear seat of his automobile while visiting a friend. His...
Study smarter with the SolutionInn App