Question
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
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 variance of a portfolio that has 100% weight allocated to the T-bill and 0% weight allocated to an S&P500 index-tracking ETF. Please enter your answer rounded to three decimal places
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 40% weight allocated to the T-bill and 60% weight allocated to an S&P500 index-tracking ETF. Please enter your answer in decimal form rounded to the third decimal place.
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 utility of a portfolio that has 80% weight allocated to the T-bill and 20% weight allocated to an S&P500 index-tracking ETF if your utility function is as described in the book/lecture with a coefficient of risk aversion of 3 (U=E(R)-1/2(3). Please compute utility using returns and standard deviations in decimal form (e.g., enter .05 instead of 5 for the T-bill return.) Please enter your answer in decimal form rounded to the third decimal place. |
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