Question
b. Compute the proportion in the optimal risky portfolio. (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.) c. What
b. Compute the proportion in the optimal risky portfolio. (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.)
c. What is the Sharpe ratio for the optimal portfolio? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)
d. By how much did the position in the active portfolio improve the Sharpe ratio compared to a purely passive index strategy? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)
e. What should be the exact makeup of the complete portfolio (including the risk-free asset) for an investor with a coefficient of risk aversion of 2.2? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts Residual Expected Standard Asset Return (%) Beta Deviation (%) Stock A 24 1.7 60 Stock B 20 1.9 68 Stock c 16 0.6 62 Stock D 12 1.2 55 Macro Forecasts Expected Return Asset (%) T-bills 11 Passive equity portfolio 17 Standard Deviation (%) 0 24 a. Calculate expected excess returns, alpha values, and residual variances for these stocks. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round "Alpha values" to 1 decimal place.) Stock D Stock A 13% % Stock B 9 % Excess returns % Stock C 5 % % 3,844 % % Alpha values Residual variances 3,600 4,624 3,025 Final Positions Bills % M % A % B % % D % Total % A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts Residual Expected Standard Asset Return (%) Beta Deviation (%) Stock A 24 1.7 60 Stock B 20 1.9 68 Stock c 16 0.6 62 Stock D 12 1.2 55 Macro Forecasts Expected Return Asset (%) T-bills 11 Passive equity portfolio 17 Standard Deviation (%) 0 24 a. Calculate expected excess returns, alpha values, and residual variances for these stocks. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round "Alpha values" to 1 decimal place.) Stock D Stock A 13% % Stock B 9 % Excess returns % Stock C 5 % % 3,844 % % Alpha values Residual variances 3,600 4,624 3,025 Final Positions Bills % M % A % B % % D % Total %Step by Step Solution
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