Question
Given the following information, answer the following questions: Expected Return on the stock market: 15%; Standard deviation of the stock market return 40% Expected Return
Given the following information, answer the following questions:
Expected Return on the stock market: 15%; Standard deviation of the stock market return 40%
Expected Return on bond market: 5%; Standard deviation of the stock market return 10%
Correlation between the Stock Market and the Bond Market = 0.2
Return on Treasury Bills: 2%
Inflation: 3%
Find the following:
1) Real expected return of the Stock Market
2) Real expected return of the Bond Market
3) Real return from Treasury Bills
4) Expected Risk Premium of the Stock Market
5) Expected Risk Premium of the Bond Market
6) Risk Premium of Treasury Bills
7) Sharpe Ratio of the Stock Market
8) Sharpe Ratio of the Bond Market
Now using combined portfolios:
80/20
9) Expected Return of a portfolio of: 80% Stock, 20% Bond
10) Standard Deviation of a portfolio of: 80% Stock, 20% Bond
11) Sharpe Ratio of a portfolio of: 80% Stock, 20% Bond
50/50
12) Expected Return of a portfolio of: 50% Stock, 50% Bond
13) Standard Deviation of a portfolio of: 50% Stock, 50% Bond
14) Sharpe Ratio of a portfolio of: 50% Stock, 50% Bond
10/90
12) Expected Return of a portfolio of: 10% Stock, 90% Bond
13) Standard Deviation of a portfolio of: 10% Stock, 90% Bond
14) Sharpe Ratio of a portfolio of: 10% Stock, 90% Bond
60/0/40
15) Expected Return of a portfolio of: 60% Stock, 0% Bond, 40% Treasury Bills
16) Standard Deviation of a portfolio of: 60% Stock, 0% Bond, 40% Treasury Bills
17) Sharpe Ratio of a portfolio of: 60% Stock, 0% Bond, 40% Treasury Bills
Given the following information, answer the following questions:
Expected Return on the stock market: 15%; Standard deviation of the stock market return 40%
Expected Return on bond market: 5%; Standard deviation of the stock market return 10%
Correlation between the Stock Market and the Bond Market = 0.2
Return on Treasury Bills: 2%
Inflation: 3%
Find the following:
1) Real expected return of the Stock Market
2) Real expected return of the Bond Market
3) Real return from Treasury Bills
4) Expected Risk Premium of the Stock Market
5) Expected Risk Premium of the Bond Market
6) Risk Premium of Treasury Bills
7) Sharpe Ratio of the Stock Market
8) Sharpe Ratio of the Bond Market
Now using combined portfolios:
80/20
9) Expected Return of a portfolio of: 80% Stock, 20% Bond
10) Standard Deviation of a portfolio of: 80% Stock, 20% Bond
11) Sharpe Ratio of a portfolio of: 80% Stock, 20% Bond
50/50
12) Expected Return of a portfolio of: 50% Stock, 50% Bond
13) Standard Deviation of a portfolio of: 50% Stock, 50% Bond
14) Sharpe Ratio of a portfolio of: 50% Stock, 50% Bond
10/90
12) Expected Return of a portfolio of: 10% Stock, 90% Bond
13) Standard Deviation of a portfolio of: 10% Stock, 90% Bond
14) Sharpe Ratio of a portfolio of: 10% Stock, 90% Bond
60/0/40
15) Expected Return of a portfolio of: 60% Stock, 0% Bond, 40% Treasury Bills
16) Standard Deviation of a portfolio of: 60% Stock, 0% Bond, 40% Treasury Bills
17) Sharpe Ratio of a portfolio of: 60% Stock, 0% Bond, 40% Treasury Bills
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