Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Statistics and Probability Expert

describe expected returns and risk in portfolio.

1)      You friend John has discovered two Apex and Bull and recommended to you. Utilizing the historical data John has estimated the means and volatilities and correlation of the two stocks as the following

 

Stock A

Stock B

Means

0.15

0.09

St. Dev.

0.32

0.23

Correlation among the two stocks is 0.15. Presume that the risk-free rate is 5.50%.

1) Without taking this class John merely split his investment equally in the two stocks. describe what is the expect return and volatility of his portfolio?

2) describe what is the Sharpe ratio of John's portfolio?

3) One thing you have learned is that the tangency portfolio will give you the maximum Sharpe ratio. Therefore, you have constructed such a portfolio. What are you portfolio weights?

4) describe what your portfolio's Sharpe ratio is and how much can you gain?

2. Continue from the above problem.

1) Since John does not understand the concept of Sharpe ratio, you construct a BEST portfolio that yields the same return as that of John. What are the portfolio weights? (Hint- use the risk-free asset too)

2) describe what is the volatility of your portfolio, and how much volatility can you cut relative that of John?

3) describe what is your allocation in the three assets-Stock A, Stock B and the Risk-free?

Statistics and Probability, Statistics

  • Category:- Statistics and Probability
  • Reference No.:- M922210

Have any Question? 


Related Questions in Statistics and Probability

The amount of time university professors devote to their

The amount of time university professors devote to their jobs per week is normally distributed with a mean of 52 hours and a standard deviation of 6 hours. 1. What is the probability that a professor selected at random w ...

Suppose a pair of random variablesnbsp xy uniformly

Suppose a pair of random variables  (X,Y) uniformly distributed over a rectangular region  Find the conditional PDF (X,Y) given the conditioning event   where the region is an arbitrary region completely contained within ...

If the input to a linear filter is a random telegraph

If the input to a linear filter is a random telegraph process with zero-crossings per second and an amplitude A , determine the output PSD. The filter impulse response is

With regard to the standard deviation illustrate how and

With regard to the standard deviation, illustrate how and why the larger the deviation number, the more difficult it would be to predict an outcome. Use specific examples to illustrate.

Suppose x is a vector of iid random variables where each

Suppose X is a vector of IID random variables where each element has some PDF,    Find an example PDF such that the median is a better estimate of the mean than the sample mean.

1 umu stat club is sending a delegate of 2 members to

1. UMU Stat Club is sending a delegate of 2 members to attend the 2015 Joint Statistical Meeting in Seattle. There are 10 qualified candidates. How many different ways can the delegate be selected? 2 . Imagine you are in ...

Why do so many womens lives seem to be divided between

Why do so many women's lives seem to be divided between working for money or goods, and homemaking during the period 1800-1860?

Suppose the arrival of calls at a switchboard is modeled as

Suppose the arrival of calls at a switchboard is modeled as a Poisson process with the rate of calls per minute being  (a) What is the probability that the number of calls arriving in a 10-minute interval is less than 10 ...

An automobile manufacturing plant produced 29 vehicles

An automobile manufacturing plant produced 29 vehicles today: 9 were sedans, 11 were vans, and 9 were trucks. Plant managers are going to choose two of these vehicles for thorough inspection. The first vehicle will be ch ...

Suppose the arrival of telephone calls at a switch can be

Suppose the arrival of telephone calls at a switch can be modeled with a Poisson PMF. That is, if is the number of calls that arrive in minutes, then Where λ is the average arrival rate in calls/minute. Suppose that the ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate