Stock A has expected return of 14% and volatility 30%. Stock B has expected return of...
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Stock A has expected return of 14% and volatility 30%. Stock B has expected return of 8% and volatility 19%. The correlation between two stocks is -0.2. The risk free interest rate is 4%. (a) Find the expected returns, volatilities, and Sharpe ratios of portfolios that maintain 100r% investment in Stock A and 100(1-r)% in Stock B, where a is given in the following table. Volatility Expected return Sharpe ratio 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 (b) How to create the tangent portfolio. Compute its expected return, volatility, and Sharpe ratio. (c) Construct an efficient portfolio that has a total of investment of $10,000 and expected return of 10%. What is the volatility of this portfolio? (d) Construct an efficient portfolio that has a total of investment of $10,000 and volatility of 20%. What is its expected return? Stock A has expected return of 14% and volatility 30%. Stock B has expected return of 8% and volatility 19%. The correlation between two stocks is -0.2. The risk free interest rate is 4%. (a) Find the expected returns, volatilities, and Sharpe ratios of portfolios that maintain 100r% investment in Stock A and 100(1-r)% in Stock B, where a is given in the following table. Volatility Expected return Sharpe ratio 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 (b) How to create the tangent portfolio. Compute its expected return, volatility, and Sharpe ratio. (c) Construct an efficient portfolio that has a total of investment of $10,000 and expected return of 10%. What is the volatility of this portfolio? (d) Construct an efficient portfolio that has a total of investment of $10,000 and volatility of 20%. What is its expected return?
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Related Book For
Fundamentals of corporate finance
ISBN: 978-0073382395
9th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Posted Date:
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