Answered step by step
Verified Expert Solution
Question
1 Approved Answer
In the context of a one factor APT model, you at the following three portfolios: Portfolio Expected return Factor sensitivity A 4 1.33 B 13
In the context of a one factor APT model, you at the following three portfolios:
Portfolio | Expected return | Factor sensitivity |
A | 4 | 1.33 |
B | 13 | 1.32 |
C | 8 | 0.66 |
You wish to construct a composite portfolio from B and C that has the same factor sensitivity as portfolio A. What would be the weight of portfolio B in your asset mix?
Enter weight as a percentage.
Hint: remember that factor sensitivity of a portfolio is a linear weighted average of the sensitivities of its components. And that all weights have to add up to 1 (100%).
The answer is 101.52.
Please show how to get to that in excel.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started