Suppose you have some money invested in corporate bonds. This portfolio's expected return is 10%, and...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Suppose you have some money invested in corporate bonds. This portfolio's expected return is 10%, and the standard deviation of returns is 12%. Your financial adviser recommends moving that money into an index fund that closely tracks the S&P 500 index. The index has an expected return of 12.5 %, and its standard deviation is 14%. Can you create a combination of the index fund and Treasury bills, that will increase your expected rate of return without changing the risk of the portfolio? Assume Treasury bills yield 4%. 73.5% invested in the index fund and the remainder in Treasury bills 85.7% invested in the index fund and the remainder in Treasury bills 70.6% invested in the index fund and the remainder in Treasury bills 76.1% invested in the index fund and the remainder in Treasury bills 79.6% invested in the index fund and the remainder in Treasury bills O O O O Suppose you have some money invested in corporate bonds. This portfolio's expected return is 10%, and the standard deviation of returns is 12%. Your financial adviser recommends moving that money into an index fund that closely tracks the S&P 500 index. The index has an expected return of 12.5 %, and its standard deviation is 14%. Can you create a combination of the index fund and Treasury bills, that will increase your expected rate of return without changing the risk of the portfolio? Assume Treasury bills yield 4%. 73.5% invested in the index fund and the remainder in Treasury bills 85.7% invested in the index fund and the remainder in Treasury bills 70.6% invested in the index fund and the remainder in Treasury bills 76.1% invested in the index fund and the remainder in Treasury bills 79.6% invested in the index fund and the remainder in Treasury bills O O O O
Expert Answer:
Answer rating: 100% (QA)
A E 1 Portfolio retrun 10 3 Portfolio Standard deviation 12 4 I... View the full answer
Related Book For
Essentials of Business Statistics
ISBN: 978-0078020537
5th edition
Authors: Bruce Bowerman, Richard Connell, Emily Murphree, Burdeane Or
Posted Date:
Students also viewed these accounting questions
-
Assume that the mean and the standard deviation of the difference scores in Exercise 13.6 would remain the same if we added more subjects. How many subjects would we need to obtain a t that is...
-
Standard deviation of returns is often used as a measure of a mutual funds volatility (risk). A larger standard deviation of returns is an indication of higher risk. According to Morningstar.com...
-
Suppose you have some money to invest for simplicity, $1 and are planning to put a fraction w into a stock market mutual find and the rest, 1-w, into a bond mutual fund. Suppose that a $1 invested in...
-
By a work sampling study: Observed Data The machine is being used Proportion of manual labour (machine is running and/or (servicing time) T-% machine is random serviced) Allowance Time Proportion of...
-
Capital budgets are neither absolute limits on investment nor automatically affected by project ranking on purely quantitative grounds Do you agree or disagree with this statement? Explain.
-
Katy Perry, a health record technician, was preparing records to be filed when she found one that she thought needed the attention of the HIM director. She notices there are some suspicious sections...
-
A simple pendulum of length \(0.8 \mathrm{~m}\) is released from the initial position of \(80^{\circ}\) from the vertical. How long does it take to reach the position \(\theta=0^{\circ}\) ?
-
Identification of Fiduciary Funds. Following is a list of fund names and descriptions of funds from comprehensive annual financial reports (CAFRs). Required For each fund, indicate which type of fund...
-
XYZ Inc is a Canadian Controlled private corporation. The company's controller has prepared an income statement for the year for the company(the amounts shown do not include any applicable HST): XYZ...
-
Write a program that produces calendars as output. Your program should have a method that outputs a single months calendar like the one below, given parameters to specify how many days are in the...
-
Write a C program to find area of rectangle (Ar) and find value of 'y', y=x+2x+x-2 Note: Area of rectangle(Ar)-L*W, assume any values for L, W, and x. Use proper math function wherever required.
-
A scalar quantity has (a) only magnitude, (b) only direction, (c) both magnitude and direction.
-
The heights of 500 male students, half of whom are adults while the other half are eight years of age. Answer the following questions: a. How many modes would you expect for the distribution? b....
-
Indicate true or false for the following statements. If false, specify what change will make the statement true. _______ When the test statistic is t and the number of degrees of freedom is >30, the...
-
2 5 = 32 Change each exponential expression to an equivalent expression involving a logarithm.
-
Assume that you are manufacturing aspirin tablets that are supposed to contain 325 mg of aspirin. If the standard deviation of the amounts of aspirin is calculated, which value would you prefer: a...
-
How to implement in Android Studio ? About this assignment In this assignment, I would like you to create an app to introduce a bit about yourself (see below as an example). You can write whatever...
-
Why is homeostasis defined as the "relative constancy of the internal environments? Does negative feedback or positive feedback tend to promote homeostasis?
-
Referring to Exercise 8.12b (page 299), assume that the population standard deviation equals .66. How large a sample of late replacement buyers is needed to make us? In exercise Suppose that a random...
-
The trend in home building in recent years has been to emphasize open spaces and great rooms, rather than smaller living rooms and family rooms. A builder of speculative homes in the college...
-
A real estate agency collects the data in Table concerning y = sales price of a house (in thousands of dollars) x1 = home size (in hundreds of square feet) x2 = rating (an overall niceness rating for...
-
A stirrer-container assembly contains a certain amount of fluid. The stirrer performs \(3 \mathrm{hp}\) work on the system. The heat developed by stirring is \(4000 \mathrm{~kJ} / \mathrm{h}\) and is...
-
A system consisting of a gas confined in a cylinder undergoes a series of processes shown in Fig. 2.11. During the process A-1-B, \(70 \mathrm{~kJ}\) of heat is added while it does 45 \(\mathrm{kJ}\)...
-
Derive the mathematical expression of the first law of thermodynamics.
Study smarter with the SolutionInn App