Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Part 3: Quantitative exercises (60%) Exercise 1 (12 points) Consider as if you manage a risky portfolio with an expected rate of retum 17% and
Part 3: Quantitative exercises (60%) Exercise 1 (12 points) Consider as if you manage a risky portfolio with an expected rate of retum 17% and a standard deviation of 27%. The T-bill rate is 7%. Your client chooses to invest 70% of a portfolio in your fund and 30 in an essentially risk-free money market fund. a. What is the expected return and standard deviation of the rate of return in his porttono b. What is the reward-to-volatility ratio (Sharpe ratio of your risky portfolio and your client's portfolio? Version 2 Exercise 2 (12 points) Consider again the same data for your client as in exercise 1. Your client's degree of risk aversion is A= 2.5. a. What proportion, y, of the total investment should be invested in your fund? b. What is the expected value and standard deviation of the rate of return in your client's optimized portfolio Ton 2 Part 3: Quantitative exercises (60%) Exercise 1 (12 points) Consider as if you manage a risky portfolio with an expected rate of retum 17% and a standard deviation of 27%. The T-bill rate is 7%. Your client chooses to invest 70% of a portfolio in your fund and 30 in an essentially risk-free money market fund. a. What is the expected return and standard deviation of the rate of return in his porttono b. What is the reward-to-volatility ratio (Sharpe ratio of your risky portfolio and your client's portfolio? Version 2 Exercise 2 (12 points) Consider again the same data for your client as in exercise 1. Your client's degree of risk aversion is A= 2.5. a. What proportion, y, of the total investment should be invested in your fund? b. What is the expected value and standard deviation of the rate of return in your client's optimized portfolio Ton 2
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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