You are an investment analyst and you were tasked to create an investment portfolio for a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are an investment analyst and you were tasked to create an investment portfolio for a risk-averse client. Owing to the client being risk-averse, they wish invest 50% in low-risk bonds, but are indifferent to having other types of assets in the portfolio. You wish to propose a more profitable portfolio to your client, with possibly more weight on risky assets with higher returns. But you do not know how much weight each financial asset should have in the new portfolio. The tables below show the data you have on Vanguard Intermediate-Term Treasury Index Fund, on the stock Inversora Juramento S.A. listed on the Buenos Aires Stock Exchange, and on YTL Corporation Berhad listed on the Malaysian Stock Exchange. Vanguard (VGIT) Inversora Juramento YTL Corp. Berhad Return (R) Standard deviation (stdev) beta 5% 0.78 28% 1.2 30% 1.03 Vanguard (VGIT) Inversora Juramento YTL Corp. Berhad 2% 10.04% 8.29% The correlation matrix between the returns of each asset is: Vanguard (VGIT) Inversora Juramento YTL Corp. Berhad 1 -0.01 -0.15 1 -0.85 1. You client would like to invest only in Vanguard (VGIT) and YTL Corp. Berhad. Calculate the return and the risk of an optimal portfolio with these 2 assets, based on the optimal weights formula. The risk-free rate is 0%. 2. Calculate the return and the risk of a portfolio with the weights w =25%, W = 45%, and w3-30% ("1" stands for Vanguard (VGIT); "2" for Inversora Juramento and "3" for YTL Corp. Berhad). 3. Which portfolio above would you recommend to your client? Justify your answer. 4. Calculate the beta of each portfolio above. Compare the portfolio risks suggested by the portfolio betas with the portfolio risks calculated by the mean-variance analysis in (a) and (b) above. You are an investment analyst and you were tasked to create an investment portfolio for a risk-averse client. Owing to the client being risk-averse, they wish invest 50% in low-risk bonds, but are indifferent to having other types of assets in the portfolio. You wish to propose a more profitable portfolio to your client, with possibly more weight on risky assets with higher returns. But you do not know how much weight each financial asset should have in the new portfolio. The tables below show the data you have on Vanguard Intermediate-Term Treasury Index Fund, on the stock Inversora Juramento S.A. listed on the Buenos Aires Stock Exchange, and on YTL Corporation Berhad listed on the Malaysian Stock Exchange. Vanguard (VGIT) Inversora Juramento YTL Corp. Berhad Return (R) Standard deviation (stdev) beta 5% 0.78 28% 1.2 30% 1.03 Vanguard (VGIT) Inversora Juramento YTL Corp. Berhad 2% 10.04% 8.29% The correlation matrix between the returns of each asset is: Vanguard (VGIT) Inversora Juramento YTL Corp. Berhad 1 -0.01 -0.15 1 -0.85 1. You client would like to invest only in Vanguard (VGIT) and YTL Corp. Berhad. Calculate the return and the risk of an optimal portfolio with these 2 assets, based on the optimal weights formula. The risk-free rate is 0%. 2. Calculate the return and the risk of a portfolio with the weights w =25%, W = 45%, and w3-30% ("1" stands for Vanguard (VGIT); "2" for Inversora Juramento and "3" for YTL Corp. Berhad). 3. Which portfolio above would you recommend to your client? Justify your answer. 4. Calculate the beta of each portfolio above. Compare the portfolio risks suggested by the portfolio betas with the portfolio risks calculated by the mean-variance analysis in (a) and (b) above.
Expert Answer:
Answer rating: 100% (QA)
The image displays an investment scenario with data related to three financial assets Vanguard VGIT Inversora Juramento and YTL Corp Berhad It includes their returns standard deviations betas and the ... View the full answer
Related Book For
International Financial Reporting and Analysis
ISBN: 978-1408075012
5th edition
Authors: David Alexander, Anne Britton, Ann Jorissen
Posted Date:
Students also viewed these finance questions
-
a company may generate a high income in a particular period due to increased sales of its products. However, if customers have not yet paid for these products, the company's cash flow may not...
-
Googles ease of use and superior search results have propelled the search engine to its num- ber one status, ousting the early dominance of competitors such as WebCrawler and Infos- eek. Even later...
-
The specifications for the water supply system of the Sears Tower in Chicago require that 100 gpm of water be pumped to a reservoir at the top of the tower, which is 340 m above street level. The...
-
Let f (x) = loga x and g(x) = ax, where a > 1. (a) Let a = 1.2 and use a graphing utility to graph the two functions in the same viewing window. What do you observe? Approximate any points of...
-
What is a standard cost?
-
Suppose electrons move through a copper wire at speed \(v\). Call the linear charge densities in the Earth reference frame \(\lambda_{E_{p}}\) for the fixed positive ions in the wire and...
-
The capital account for Autumn Chou, including an additional investment, and a partial work sheet are shown below. REQUIRED Prepare a statement of owner'sequity. GENERAL LEDGER ACCOUNT: Autumn Chou,...
-
estion 45: Which key lets you select multiple worksheets in a workbook? swer: (Shift) 13 (Tab) O (Alt) O (Enter)
-
Make a legal memorandum, following the format outlined in our APUS Legal Studies Writing Guide (available in the APUS library). Your memo, which will be read by other employees in your law office,...
-
use the starting code bellow In arithmetic, a number expressed as a quotient, in which a numerator is divided by a denominator. In a simple fraction, both are integers. A complex fraction has a...
-
Consider what the idea of Football as an American thing suggests about U.S. culture. What characteristics of the sport reflect our cultural and capitalist values? Think about the way the sport is...
-
Oil has a density of 950kg-3 and the sound travels through it at a speed of 1500m/s. calculate the acoustic impedance of oil
-
Purchases Discounts is what type of account? Explain.
-
The author of seeing England for the first time notes that by the time she visited England, she had become a person who resides in a powerful country that takes it more than fair share of a...
-
What is the forecast for this year using the naive approach? 2. What is the forecast for this year using a three-period moving average? 3. What is the forecast for this year using a three-period...
-
Velshi Printers has contracts to complete weekly supplements required by fortysix customers. For the year 2018, manufacturing overhead cost estimates total $600,000 for an annual production capacity...
-
Analyze the need to discount deferred inflows to an entity as permitted by IAS 18.
-
If depreciation is done properly, impairment adjustments will not arise. Discuss.
-
You are the management accountant of a manufacturing company where production is capital-intensive, using machinery that is estimated to have a five-year life. The present machinery is now...
-
What is the primary business of Satyam Computer Services Ltd?
-
In January 2009, approximately how many employees did Satyam Computer Services employ?
-
How much money did the Rajus earn from sales of Satyam stock in the eight years preceding the fraud revelation?
Study smarter with the SolutionInn App