The weights of X, Y, and Z in this efficient portfolio are? You wish to construct the
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You wish to construct the efficient portfolio that consists of the three stocks: X, Y and Z and pays 25% expected return. The expected returns on stocks X, Y and Z are 25%, 23% and 15% respectively. The variance-covariance matrix, containing variances of these stocks and covariances between each pair of stocks is given below: X Y Z X Y Z 0.16 0.06 -0.06 0.06 0.09 0.08 -0.06 0.08 0.25 You wish to construct the efficient portfolio that consists of the three stocks: X, Y and Z and pays 25% expected return. The expected returns on stocks X, Y and Z are 25%, 23% and 15% respectively. The variance-covariance matrix, containing variances of these stocks and covariances between each pair of stocks is given below: X Y Z X Y Z 0.16 0.06 -0.06 0.06 0.09 0.08 -0.06 0.08 0.25
Expert Answer:
Answer rating: 100% (QA)
The weights of the stocks in the efficient portfolio can be calculated using the formula Weight of s... View the full answer
Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
Posted Date:
Students also viewed these finance questions
-
The following data are from Gennings, Chinchilli, and Carter, (1989). An in vitro toxicity study of isolated hepatocyte suspensions was conducted to study the impact of combining carbon tetrachloride...
-
Assume you are considering investing $10,000 in a T-bill that pays 0.06 and a risky portfolio, P, constructed with 2 risky securities, X and Y. The weights of X and Y in P are 0.70 and 0.30,...
-
You wish to construct your personal utility function U(M) for receiving M thousand dollars. After setting U(0) = 0, you next set U(1) = 1 as your utility for receiving $1,000. You next want to find...
-
The last two decades have taught us that when it comes to financial deregulation, it is possible to have too much of a good thing too quickly. Financial deregulation has often taken place...
-
In a physics lab, you attach a 0.200-kg air-track glider to the end of an ideal spring of negligible mass and start it oscillating. The elapsed time from when the glider first moves through the...
-
General Motors Company has accounts receivable and notes receivable. How should the receivables be reported on the balance sheet?
-
Paired data are data for which each value in one sample can be matched with a corresponding value in another sample. In Exercises 5 and 6, determine whether the statement is true or false. If the...
-
McDonalds Corporation has reported the following values for total revenues and net income during the 1998 to 2005 period. All data are in billions of dollars: Determine the least-squares regression...
-
A Lahore firm has a net income of $34,000 which provides a 15% return on assets. The firm has a debt-equity ratio of .40. What is the return on equity
-
Dwight Donovan, the president of Donovan Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to...
-
Alexia is doing some injury prevention and power work in the high performance center. In doing a drop jump, she drops from a set height of 0 . 3 8 m above the ground and then immediately jumps back...
-
Net profit is calculated in the (A) Trading account (B) Profit and loss account (C) Trial balance (D) Statement of financial position
-
Which of these best describes non-current assets? (A) Items bought to be used in the business (B) Items which will not wear out quickly (C) Expensive items bought for the business (D) Items having a...
-
The descending order in which current assets should be shown in the statement of financial position is (A) Inventory, Accounts receivable. Bank, Cash (B) Cash, Bank, Accounts receivable, Inventory...
-
Why is it so important to fully integrate a computerised accounting system?
-
Which of the following are incorrect? (i) (ii) Sold van for cash Returned some of Office Equipment to Suppliers Ltd (iii) Repaid part of loan from C. Charles by cheque (iv) Bought machinery on time...
-
1. Assume the RV X follows a Pareto distribution with PDF: for some parameter a > 0. fx(x) = 0, ax-a-1 2 x < 1 x 1' (b) (5 points) Consider a Uniform(0,1) RV U, and find a transformation that...
-
What is your opinion of advertising awards, such as the Cannes Lions, that are based solely on creativity? If you were a marketer looking for an agency, would you take these creative awards into...
-
The farmer does not avoid risk by selling wheat futures. If wheat prices stay about $2.80 a bushel, then he will actually have lost by selling wheat futures at $2.50. Is this a fair comment?
-
How would the following actions affect a firms current ratio? a. Inventory is sold. b. The firm takes out a bank loan to pay its suppliers. c. A customer pays its overdue bills. d. The firm uses cash...
-
It is sometimes suggested that stocks with low priceearnings ratios tend to be under priced. Describe a possible test of this view. Be as precise as possible.
-
Give five reasons why fraudulent financial reporting is committed.
-
What type of audit report should the auditor issue if a material fraud is detected and the financial statements are not revised?
-
Which of the following statements best describes an auditor's responsibility to detect errors and fraud? a. The auditor should study and evaluate the client's internal control, and design the audit...
Study smarter with the SolutionInn App