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Please help doing the Homework attached. (Only Exercise 1-4). Thank you. Exercise 1 and 2 A 1 2 3 4 5 6 7 8 9

Please help doing the Homework attached. (Only Exercise 1-4). Thank you.

image text in transcribed Exercise 1 and 2 A 1 2 3 4 5 6 7 8 9 B C D E F G H I Exercise 1 Using the data on these 6 companies, compute the weights of two tangency portfolios and portfolios to generate the mean-variance efficient frontier. Plot the frontier in the usual mea (For consistency, choose the following "c" values: c=0% and c=.25% (monthly).) Hint: First compute the means and variance-covariance matrix for the six companies Also Plot the tangent to the mean-variance frontier for the risk free rate of .25% Exercise 2: Using the data on these six companies compute the return matrix and variance covariance to compute the return and variance of efficient frontier without shortsale. 11 Hint: Compute the min. variance for Rp ranging from .2% to 1% with increments of .1%. 10 12 13 Month 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 BAC -0.013194 0.006038 -0.045016 0.021315 0.028419 -0.005613 -0.044069 -0.001605 -0.021613 0.038955 0.060585 0.005666 -0.041604 0.036627 0.004144 0.096179 -0.020433 -0.006198 0.07131 0.009703 0.0408 0.0056 0.010024 -0.008542 -0.015171 -0.022632 0.003738 -0.002352 0.007269 -0.03589 -0.030068 0.068747 0.004538 -0.039586 -0.044532 -0.091697 GE MO -0.010137 0.044681 -0.019651 0.028513 0.024432 0.007159 0.003882 -0.006117 0.007735 0.033082 -0.044134 -0.026065 -0.004329 0.035571 -0.025797 0.055854 0.008331 0.05389 0.007128 0.018179 0.053377 -0.030113 -0.011758 0.037505 -0.065621 -0.031852 0.011298 -0.006082 0.058108 -0.003338 -0.005463 0.032458 -0.00954 -0.011072 -0.030648 0.025985 -0.008192 0.089064 0.041909 0.044517 0.043746 -0.073267 -0.005382 0.062443 0.004842 0.035411 0.062642 0.029331 -0.031174 0.018294 -0.023856 -0.035588 0.01289 0.052088 0.042421 0.030498 0.019533 0.031631 0.026078 -0.003797 0.012539 -0.052324 0.002838 0.044231 0.072292 0.012534 -0.005797 0.0489 -0.069728 0.063485 -0.023766 -0.015859 PFE AA -0.101525 -0.060789 0.096027 0.093528 -0.000761 -0.053861 0.03426 -0.045081 0.033861 -0.060992 -0.01147 -0.035793 -0.039159 0.073479 -0.031321 -0.039572 -0.020016 -0.088466 -0.129355 -0.005323 -0.016099 0.134623 0.1 0.078803 0.101201 0.065269 0.029206 -0.064444 -0.048492 0.042292 0.016453 0.105366 -0.056455 -0.056542 -0.00803 0.020177 0.107371 -0.074475 0.069642 -0.040401 0.029028 -0.019237 -0.060296 0.031027 0.040525 0.083362 -0.057839 -0.037215 0.013127 0.081973 -0.037729 0.034365 0.012019 0.014666 0.047506 0.046903 0.049887 0.167935 -0.069844 -0.018169 -0.080563 -0.057488 0.068907 -0.039267 -0.016506 0.070901 0.007368 0.01636 -0.022755 -0.081334 -0.04335 0.004949 Page 1 VZ -0.111948 0.010677 -0.013066 0.019859 -0.011732 -0.02346 0.00246 -0.044406 -0.000611 -0.023708 0.014916 -0.058161 0.064575 0.064435 0.010683 -0.01835 -0.055101 0.073054 0.021947 0.040213 0.055429 0.007406 -0.017271 0.065827 0.045247 -0.029076 0.013904 0.017537 0.140126 -0.054215 0.045057 -0.017363 0.057307 0.050136 -0.062079 0.011109 Exercise 1 and 2 A 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 B 0.070044 -0.099887 -0.029945 -0.00976 -0.094033 -0.27933 0.378299 -0.053496 0.144509 -0.309429 -0.327679 -0.113846 -0.53267 -0.399696 0.729114 0.309384 0.262038 0.172138 0.120455 0.189317 -0.037521 -0.138298 0.087106 -0.049211 C -0.046129 -0.054016 0.116777 -0.116455 -0.060551 -0.121094 0.059948 -0.006716 -0.081495 -0.234902 -0.119939 -0.038439 -0.251235 -0.272877 0.188014 0.251236 0.065613 -0.123145 0.143345 0.037313 0.188489 -0.131547 0.123422 -0.049313 D 0.002779 -0.034965 -0.001777 -0.099099 0.113 -0.063342 -0.010214 0.033415 -0.041369 -0.032762 -0.162064 -0.043532 0.098274 -0.066506 0.05829 0.019351 0.04654 -0.022235 0.069555 0.042784 -0.007112 0.016845 0.038653 0.061669 E 0.027717 -0.032534 -0.060592 -0.039178 -0.021382 -0.097624 0.068689 0.040707 -0.03506 -0.039588 -0.054207 0.077906 -0.176736 -0.133745 0.106417 -0.01909 0.148952 -0.012508 0.062 0.05838 -0.008982 0.029003 0.076336 0.001101 Page 2 F -0.094665 0.127531 -0.029079 -0.030782 0.16705 -0.122444 -0.052499 -0.042963 -0.29723 -0.4907 -0.049565 0.046468 -0.308171 -0.178434 0.17817 0.235695 0.019846 0.12039 0.138432 0.027211 0.088797 -0.053354 0.010467 0.28754 G -0.101396 -0.064641 0.003579 0.071672 -0.00026 -0.079802 -0.026271 0.031727 -0.086276 -0.061078 0.100438 0.038285 -0.10531 -0.044861 0.058535 0.019868 -0.035597 0.050239 0.058575 -0.032117 -0.024807 -0.006772 0.063197 0.053083 H I Exercise 1 and 2 J K L M N 1 wo tangency2 portfolios and use these two 3 the usual mean-standard deviation space. the frontier in 4 =.25% (monthly).) 5 for the six companies 6 ree rate of .25% 7 8 9 rix and variance covariance matrix and then use solver shortsale. 10 11 with increments of .1%. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 Page 3 Exercise 1 and 2 J K L M N 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 Page 4 UN-9M Consider a situation with 4 assets making up the entire economy and the following ANNUAL expected rates of return and variance-covariance matrix: m= 0.12 0.16 0.13 0.1 V= 0.25 0.034 0.016 0.019 0.034 0.88 0.032 0.046 0.016 0.032 0.15 0.027 0.019 0.046 0.027 0.102 Find the expected return and standard deviation of the efficient Market portfolio, assuming that CAPM holds and that the riskless rate Rf=8% (Annual). Solution: Exercise 4 Use the following variance-covariance matrix and vector of mean returns to find two efficient portfolios by choosing first choose c=0 and then c=0.065 (hypothetical riskless rates) and infer the corresponding tangency portfolios x and Then form a portfolio made up of these two efficient portfolios x and y, assigning a weight lambda to portfolio x and Finally, use the Excel solver (or "goal seek") to find the weights, expected return, and standard deviation of the "zero (Hint: remember the properties of the Cov (covariance) function when computing the covariance between the zero-be Variance-covariance matrix 0.25 0.034 0.016 0.034 0.88 0.032 0.016 0.032 0.15 0.019 0.046 0.027 Mean returns 0.12 0.16 0.04 0.09 0.019 0.046 0.027 0.102 Page 6 Exercise 4 fficient portfolios by choosing two constants "c" : ding tangency portfolios x and y. ight lambda to portfolio x and (1-lambda) to portfolio y. tandard deviation of the "zero beta" portfolio with respect to y. covariance between the zero-beta portfolio and portfolio y Page 7 End of Chapter Problems (chapter 6) Problems 1,2,3 and 6

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