Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Historically the S&P500 index return has averaged 8% higher than the T-bill return, and its standard deviation has been 20% per year. Assume these historical

image text in transcribed
image text in transcribed
Historically the S&P500 index return has averaged 8% higher than the T-bill return, and its standard deviation has been 20% per year. Assume these historical averages represent investor expectations of future S&P500 risk and return also, and that the expected return on a T-bill is 5% with zero standard deviation. Calculate the expected return of a portfolio that has 80% weight allocated to the T-bill and 20% weight allocated to an S&P500 index-tracking ETF. Please enter your answer in decimal form rounded to the third decimal place. Calculate the variance of a portfolio that has 20% weight allocated to the T-bill and 80% weight allocated to an S&P500 index-tracking ETF. Please enter your answer rounded to three decimal places

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

Foundations of Financial Management

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen

15th edition

77861612, 1259194078, 978-0077861612, 978-1259194078

Students also viewed these Finance questions

Question

6.8 Find a z o such that P(-z

Answered: 1 week ago