Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

solve it in a paper not in excel Exercise 5 The prices of 4 securities between 2010 and 2015 are listed in the following table

solve it in a paper not in excel image text in transcribedimage text in transcribed

Exercise 5 The prices of 4 securities between 2010 and 2015 are listed in the following table Year Security 1 Security 2 Security 3 Security 4 2010 17 235 61 83 2011 17 174 67 60 2012 16 204 75 68 2013 24 184 67 70 15 200 74 55 2014 2015 23 177 74 79 1- Calculate the rate of return of each security in each years. 2- Calculate the expected rate of return of each security. 3- Calculate the standard deviation of the rate of return of each security. 4- Calculate the covariance between each two securities. 5- In 2015, Mr. Brooks had $20000 and decided to take the following positions in the 4 securities Long 100 shares of security 1 Long 200 shares of security 2 Short 500 shares of security 3 Long 300 shares of security 4 Borrow money at the risk free: risk free = 4% a- Calculate the weight of each security in the portfolio. b- Calculate the expected rate of return of the portfolio. a- Calculate the standard deviation of the portfolio given that the risk free has 0 correlations with all other securities. 6- Mrs. Brooks has $20000 and decided to take the following positions the 4 securities Short 150 shares of security 1 Long 300 shares of security 2 Long 100 shares of security 3 Short 500 shares of security 4 Invest the extra cash at the risk free: risk free = 3% b- Calculate the weight of each security in the portfolio constructed by the investor 2 including the weight of cash. C- Calculate the expected rate of return and the standard deviation of the portfolio given that the risk free has 0 correlations with all other securities. 7- Their son had $1000 and wanted to have a rate of return of 50% by investing in just one security and borrowing or depositing or investing in just two securities. Which portfolio would give him the least risky investment. Exercise 5 The prices of 4 securities between 2010 and 2015 are listed in the following table Year Security 1 Security 2 Security 3 Security 4 2010 17 235 61 83 2011 17 174 67 60 2012 16 204 75 68 2013 24 184 67 70 15 200 74 55 2014 2015 23 177 74 79 1- Calculate the rate of return of each security in each years. 2- Calculate the expected rate of return of each security. 3- Calculate the standard deviation of the rate of return of each security. 4- Calculate the covariance between each two securities. 5- In 2015, Mr. Brooks had $20000 and decided to take the following positions in the 4 securities Long 100 shares of security 1 Long 200 shares of security 2 Short 500 shares of security 3 Long 300 shares of security 4 Borrow money at the risk free: risk free = 4% a- Calculate the weight of each security in the portfolio. b- Calculate the expected rate of return of the portfolio. a- Calculate the standard deviation of the portfolio given that the risk free has 0 correlations with all other securities. 6- Mrs. Brooks has $20000 and decided to take the following positions the 4 securities Short 150 shares of security 1 Long 300 shares of security 2 Long 100 shares of security 3 Short 500 shares of security 4 Invest the extra cash at the risk free: risk free = 3% b- Calculate the weight of each security in the portfolio constructed by the investor 2 including the weight of cash. C- Calculate the expected rate of return and the standard deviation of the portfolio given that the risk free has 0 correlations with all other securities. 7- Their son had $1000 and wanted to have a rate of return of 50% by investing in just one security and borrowing or depositing or investing in just two securities. Which portfolio would give him the least risky investment

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Public Finance An International Perspective

Authors: Joshua E. Greene

1st Edition

9814365041, 978-9814365048

More Books

Students also viewed these Finance questions