Answered step by step
Verified Expert Solution
Question
1 Approved Answer
22. You are a fund manager who is managing Bauer High-Tech Fund. Your current portfolio isa mix of P and the riskfree asset is F.
22. You are a fund manager who is managing Bauer High-Tech Fund. Your current portfolio isa mix of P and the riskfree asset is F. You analyze all available information and summarize it in the following table. The last column shows the correlation between P and a new stock. Suppose today Palantir, WeWork, Warby Parker, Uber, and Airbnb are available in the market because of their IPOs. Now your boss asks you to include only one stock among them in your portfolio to adjust the risky part of your portfolio. Also, your boss wants you to use only 5% of the value of the current risk part P of your whole portfolio to buy a new stock. For example, if you choose Uber, the new risky part of your portfolio weight will be (Uber, P)-(5%, 95%) Corr(P, ...) SD[r] 13.0% 0.0% 38.0% 45.0% 48.0% 60.0% 40.0% E[rl 9.0% 2.0% 12.0% 14.0% 16.0% 17.0% 13.0% Asset Palantir WeWork Warby Parker Uber Airbnb 0.40 0.70 0.50 0.60 0.55 What stock should you include in your portfolio if you prefer high expected return and low volatility? Type the number only 1) Palantir 2) WeWork 3) Warby Parker 4) Uber 5) Airbnlb 6) None of them
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started