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As a manager with a risk aversion of 15, you select securities for investment based on the single-index model: - r;= a + BCR -
As a manager with a risk aversion of 15, you select securities for investment based on the single-index model: - r;= a + BCR - ry) + . Suppose you have obtained the following information: Stock A B D E F M B 0.0087 0.1618 0.1050 0.0173 1.0524 0.2667 0.0017 0.6189 0.1637 0.0055 1.0446 0.0929 0.0016 1.1048 0.1645 0.0072 0.7845 0.0840 0.0000 1.0000 0.0000 The expected return on the index portfolio is 9% with a standard deviation of 7.5%. The risk free rate is 3% a) Calculate the expected returns of the securities. b) Calculate the covariance matrix of the securities. (c) Calculate the optimal risky portfolio weights in the selected securities. What is the optimal Sharpe ratio? d) Breakdown your complete investment portfolio in the selected securities. As a manager with a risk aversion of 15, you select securities for investment based on the single-index model: - r;= a + BCR - ry) + . Suppose you have obtained the following information: Stock A B D E F M B 0.0087 0.1618 0.1050 0.0173 1.0524 0.2667 0.0017 0.6189 0.1637 0.0055 1.0446 0.0929 0.0016 1.1048 0.1645 0.0072 0.7845 0.0840 0.0000 1.0000 0.0000 The expected return on the index portfolio is 9% with a standard deviation of 7.5%. The risk free rate is 3% a) Calculate the expected returns of the securities. b) Calculate the covariance matrix of the securities. (c) Calculate the optimal risky portfolio weights in the selected securities. What is the optimal Sharpe ratio? d) Breakdown your complete investment portfolio in the selected securities
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