Answered step by step
Verified Expert Solution
Link Copied!

Question

...
1 Approved Answer

e (b) Design an Excel spreadsheet to estimate the portfolio's risk and return that consists of following assets: Asset: Expected Risk Return (0) Coefficient of

image text in transcribed
image text in transcribed
e (b) Design an Excel spreadsheet to estimate the portfolio's risk and return that consists of following assets: Asset: Expected Risk Return (0) Coefficient of correlation (Pij) (R) f ba d f ORI (Government Bond)? 7% 0% 1 b AA Corporate Bond 10% 5% 0 1 a Stock-A 12% 7% 0 -0.5 1 Stock-C 15% 9% 0 -0.2 0.3 1 d Stock-D 19% 10% 0 -0.3 0.4 1 e Stock-E 25% 15% 0 -0.6 0.7 0.6 0.8 1 note that Py =P 2 Bond issued by government (ministry of finance) is considered as a risk-free asset because the government guaranteed that it will pay the coupons (interests) as well as the principal (nominal) value at the maturity date. 0.5 3 of 3 4 (a) Please review the estimated data provided in Task 1(b) and your spreadsheet. Determine the solver parameters to compute/estimate the maximum expected return you may get when the target portfolio's risk is as follows: Portfolio Maximum Target std.dev Expected return 1 0,00% ? 2 1,00% ? 3 2,00% ? 3,00% ? 5 4,00% ? 6 5,00% ? 7 6,00% 8 7,00% ? 8,00% ? 10 9,00% ? 11 10,00% ? 12 11,00% ? 13 12,00% ? 14 13,00% ? 15 14,00% ? 15,00% ? (b) Based on the aboved computation, what is (are) the advantage(s) of investing in the portfolio compare with investing only in one particular asset? ? 9 16 e (b) Design an Excel spreadsheet to estimate the portfolio's risk and return that consists of following assets: Asset: Expected Risk Return (0) Coefficient of correlation (Pij) (R) f ba d f ORI (Government Bond)? 7% 0% 1 b AA Corporate Bond 10% 5% 0 1 a Stock-A 12% 7% 0 -0.5 1 Stock-C 15% 9% 0 -0.2 0.3 1 d Stock-D 19% 10% 0 -0.3 0.4 1 e Stock-E 25% 15% 0 -0.6 0.7 0.6 0.8 1 note that Py =P 2 Bond issued by government (ministry of finance) is considered as a risk-free asset because the government guaranteed that it will pay the coupons (interests) as well as the principal (nominal) value at the maturity date. 0.5 3 of 3 4 (a) Please review the estimated data provided in Task 1(b) and your spreadsheet. Determine the solver parameters to compute/estimate the maximum expected return you may get when the target portfolio's risk is as follows: Portfolio Maximum Target std.dev Expected return 1 0,00% ? 2 1,00% ? 3 2,00% ? 3,00% ? 5 4,00% ? 6 5,00% ? 7 6,00% 8 7,00% ? 8,00% ? 10 9,00% ? 11 10,00% ? 12 11,00% ? 13 12,00% ? 14 13,00% ? 15 14,00% ? 15,00% ? (b) Based on the aboved computation, what is (are) the advantage(s) of investing in the portfolio compare with investing only in one particular asset? ? 9 16

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Recommended Textbook for

Managerial Accounting

Authors: Ray Garrison, Eric Noreen, Peter Brewer

16th edition

978-1259307416

Students also viewed these Finance questions

Question

How have Java applets affected society?

Answered: 1 week ago