A. The following table provides values of sensitivities and expected returns for portfolios of P, Q...
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A. The following table provides values of sensitivities and expected returns for portfolios of P, Q and T. Suppose portfolio returns can be described by a 2-factor model with intercept (3 factors including intercept), and the weights have to be greater than or equal to 0. Determine the equation that describes the equilibrium returns for the following portfolios. Expected Return (%) Portfolio Bil Bi2 P 1.2 0.6 Q 0.8 1.2 T 1.2 1.5 13.5 15.7 20.2 (8 marks) B. Suppose portfolio Y with the following characteristics: Actual Return 18.5 %; By 1.35 and By2= 0.95. Would you recommend investment in portfolio Y? Why? (3 marks) A. The following table provides values of sensitivities and expected returns for portfolios of P, Q and T. Suppose portfolio returns can be described by a 2-factor model with intercept (3 factors including intercept), and the weights have to be greater than or equal to 0. Determine the equation that describes the equilibrium returns for the following portfolios. Expected Return (%) Portfolio Bil Bi2 P 1.2 0.6 Q 0.8 1.2 T 1.2 1.5 13.5 15.7 20.2 (8 marks) B. Suppose portfolio Y with the following characteristics: Actual Return 18.5 %; By 1.35 and By2= 0.95. Would you recommend investment in portfolio Y? Why? (3 marks)
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Related Book For
Stats Data and Models
ISBN: 978-0321986498
4th edition
Authors: Richard D. De Veaux, Paul D. Velleman, David E. Bock
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