Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Statistics and Probability Expert

1) Use the variance-covariance matrix (∑) and the expected return vector (er) given in the table below, compute the set of weights which correspond to the portfolio that maximizes the Sharpe Ratio assuming a risk free rate of return of 3% per year, subject only to the constraint that the sum of the weights must be 1.

2) For the portfolio derived in (1) above, find out the expected annual return and the annual standard deviation for that portfolio. Also compute the Sharpe Ratio.

3) For each of the individual assets which comprise the optimal portfolio which you determined in (1) and (2) above, compute the ratio of the expected return for each asset in excess of the risk-free rate to the marginal variance for that asset. Compare these values with the corresponding value for the portfolio as a whole. Is this what you expected? Why or why not?

4) Use the results find outd above, if an investor has a risk aversion factor of 1.3 (A), identify his investment allocation to each individual asset included in his overall portfolio. What is his expected return? What is the standard deviation of that portfolio?

5) Repeat problem (4), but for an investor with a risk tolerance factor of 3.8 (A). Do the differences among the portfolio determined in (5) and the portfolio determined in (6) make sense? Why or why not?

6) Say that you run a well-diversified mutual fund and the expected return on that fund is 16.2% and the standard deviation of that fund is 30.7%. What is the largest fee which you can charge annually for investors wanting to invest in your fund in order for investors to be indifferent among investing in your fund or in the optimal portfolio which you determined in step (2)?

7) Compute the betas for each of the individual assets that comprise the optimal portfolio with respect to that optimal portfolio.

8) Compute the expected returns using the betas that you determined in (8) and the market expected return that you find outd in (2). The risk free rate is still 3%. Are these expected returns consistent with the input data?

710_Expected return.jpg

Statistics and Probability, Statistics

  • Category:- Statistics and Probability
  • Reference No.:- M9939

Have any Question? 


Related Questions in Statistics and Probability

The question to address is what have you learned about

The question to address is: "What have you learned about statistics?" In developing your responses, consider - at a minimum - and discuss the application of each of the course elements in analyzing and making decisions a ...

The cold war why did the cold war happen how was this both

The Cold War: Why did the Cold War happen? How was this both an ideological struggle and potentially a military struggle? How did it shape American foreign policy and life within the United States?

1 what kind of variance does the mean square within-groups

1. What kind of variance does the mean square within-groups (MS wg ) reflect? 2. The sum of squares between-groups (SS bg ) reflects the degree to which the condition means vary around the __________.

A new study provides some evidence that playing action

A new Study provides some evidence that playing action video games strengths a person's ability to translate sensory information into accurate decisions. Researchers had 23 male volunteers with an average age of 20 look ...

One of the initial clinical trials of the anti-math anxiety

One of the initial clinical trials of the anti-math anxiety drug SHOVITALL TM tested for the presence of headaches as a side effect. In the trial, 450 subjects were treated with 80mg of the drug, and 2.2% of the subjects ...

Research objectives to explore correlations between reward

Research Objectives To explore correlations between reward systems and team work attributes in the Saudi Arabian bank sector To explore relationships between reward systems and team work effectiveness in the Saudi Arabia ...

An auditor claims that the average annual salary of a

An auditor claims that the average annual salary of a project manager at a construction company exceeds $82,000. A random sample of 20 project managers had an average salary of $89,600 with a sample standard deviation of ...

Research objectives to explore correlations between reward

Research Objectives To explore correlations between reward systems and team work attributes in the Saudi Arabian bank sector To explore relationships between reward systems and team work effectiveness in the Saudi Arabia ...

Twenty years ago 40 children were born in the same hospital

Twenty years ago 40 children were born in the same hospital in Denmark. Researchers classified the children by whether or not they were breast-fed for at least 3 months. They were interested in whether breast-feeding ten ...

Two population meansa tomato farmer with a very large farm

Two Population Means A tomato farmer with a very large farm of approximately 2200 acres had heard about a new type of rather expensive fertilizer which would supposedly significantly increase his production. The frugal f ...

  • 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

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen