1 Normal 1 No Spac... Heading 1 Heading 2 Title Subtitle Subtle Em... Emphasis Intense Torwig queen besu vuru serveru Styles Stocks Mean Return Standard Deviation X 8 1.2 Y 12 2 RF 0.50 0 Correlations X and Y 0.3 I Covariance with the market X 4 Y 2 Market Variance 4 Other Betas Factor 1 1.2 Factor2 -2 Factor3 1 Y 1.5 0.5 -0.6 RF Market Risk Premiums 0.50% 5% 1% 2% 4% Factor 1 Factor2 Factor3 Portfolio 2: X (30%) - Y (30%) - risk free rate (40%) a-) Find the Standard Deviation and the expected Return of the portfolio Fill the following variance covariance matrix (just the numbers up to 2 decimal Y rf Y rf portfolio stdev mean b-) Find the market, factor 1, factor 2, and factor 3 betas of the portfolio. Factor 3 market Factor 1 Factor 2 BETA c-) What are the required rate of returns of the portfolio based on CAPM and four fa respectively. 4 factor CAPM portfolio ge 3 of 4 385 words a- What are required rate of returns on X, Y, and risk-free rate based on CAPM and FF4 factor models? FF4 CAPM X Y If b- Using the average returns as expected returns, determine whether X, Y, and risk-free rate are overvalued, undervalued, fairly priced based on CAPM model. Overvalued Undervalued Fairly Priced X Y rf 4-) (12.5 points) If you have ZERO TOLERANS FOR RISK (DONOT LIKE RISK AT ALL), what would be the return and standard deviation of your portfolio based on CAPM and four factor models? (You can only invest in stocks X and Y and the risk-free rate) Four factor CAPM stdev mean Display Settings O Focus 1 Normal 1 No Spac... Heading 1 Heading 2 Title Subtitle Subtle Em... Emphasis Intense Torwig queen besu vuru serveru Styles Stocks Mean Return Standard Deviation X 8 1.2 Y 12 2 RF 0.50 0 Correlations X and Y 0.3 I Covariance with the market X 4 Y 2 Market Variance 4 Other Betas Factor 1 1.2 Factor2 -2 Factor3 1 Y 1.5 0.5 -0.6 RF Market Risk Premiums 0.50% 5% 1% 2% 4% Factor 1 Factor2 Factor3 Portfolio 2: X (30%) - Y (30%) - risk free rate (40%) a-) Find the Standard Deviation and the expected Return of the portfolio Fill the following variance covariance matrix (just the numbers up to 2 decimal Y rf Y rf portfolio stdev mean b-) Find the market, factor 1, factor 2, and factor 3 betas of the portfolio. Factor 3 market Factor 1 Factor 2 BETA c-) What are the required rate of returns of the portfolio based on CAPM and four fa respectively. 4 factor CAPM portfolio ge 3 of 4 385 words a- What are required rate of returns on X, Y, and risk-free rate based on CAPM and FF4 factor models? FF4 CAPM X Y If b- Using the average returns as expected returns, determine whether X, Y, and risk-free rate are overvalued, undervalued, fairly priced based on CAPM model. Overvalued Undervalued Fairly Priced X Y rf 4-) (12.5 points) If you have ZERO TOLERANS FOR RISK (DONOT LIKE RISK AT ALL), what would be the return and standard deviation of your portfolio based on CAPM and four factor models? (You can only invest in stocks X and Y and the risk-free rate) Four factor CAPM stdev mean Display Settings O Focus