Question: i need the answer to question 5 - - i have attached all the relevant info to help answer. ( if anything is incorrect, please

i need the answer to question 5--i have attached all the relevant info to help answer. (if anything is incorrect, please let me know so i may correct it, thank you). Suppose you created a 2-stock portfolio by investing $50,000 in High Tech and $50,000 in Collections. (1)
Calculate the expected return, the standard deviation, the coefficient of variation, and the Sharpe ratio for
this portfolio, and fill in the appropriate blanks in the table. Using data from number 1: The yield curve is currently flat; that is, long-term Treasury bonds also have a
3.0% yield. Consequently, Merrill Finch assumes that the risk-free rate is 3.0%.
(2) Write out the SML equation, use it to calculate the required rate of return on each alternative. (3) How do the expected rates of return compare with the required rates of return?
(4) What would be the market risk and the required return of a 50-50 portfolio of High Tech and Collections? (5) For a portfolio consisting of 50% High Tech and 50% U.S. Rubber?
(6) Suppose investors raised their inflation expectations by 3 percentage points over current estimates as reflected in the 3.0% risk-free rate. What effect would higher inflation have on the SML and on the returns required on high- and low-risk securities?
(7) Suppose instead that investors' risk aversion increased enough to cause the market risk premium to increase by 3 percentage points. (Inflation remains constant.) What effect would this have on the SML and on returns of high- and low-risk securities?
 i need the answer to question 5--i have attached all the

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!