Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

34. Given an expected return of the risky asset portion of your portfolio of 7.6%, and the expected return of the risk-free asset of 1.5%,

image text in transcribed

34. Given an expected return of the risky asset portion of your portfolio of 7.6%, and the expected return of the risk-free asset of 1.5%, what is the expected return of the complete portfolio if you have 35% of your assets in the risky portfolio? What is the standard deviation of the complete portfolio?

35. Given an expected return of the risky asset portion of your portfolio of 10.2%, and the expected return of the risk-free asset of 0.5%, what is the expected return of the complete portfolio if you have 75% of your assets in the risky portfolio? What is the standard deviation of the complete portfolio?

36. If you increased the percentage of risky assets in your portfolio would you expect your return to go up or down? Would your risk go up or down?

37. If you wanted to maximize your return, what percentage would you put into the risky asset? What would that do to your risk?

31. Risk averse investors would have a (higher/lower) percentage of risk free assets compared to risky assets than a risk neutral investor?

32. Risk seeking investors would have a (higher/lower) percentage of risk free assets compared to risky assets than a risk neutral investor?

Expected Retum of the Complete Portfolio Erc)= yxE(rp)+(1-y)xr; where Elr-)-Expected Return of the complete portfolio E(r) - Expected Return of the risky portfolio rReturn of the risk free asset y = Percentage assets in the risky portfolio Standard Deviation of the Complete Portfolio Oc = YXOR where - Standard deviation of the complete portfolio 0,Standard deviation of the risky portfolio

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions