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Q1.Assuming the following: Matrix Expected Return Std. Dev.-(Answered)

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Q1.Assuming the following:

Matrix

Expected Return

Std. Dev.

Correlation Matrix

Security

(% p.a.)

(% p.a.)

A

B

M

F

A

????????????? 15

? ? ? ? ? ? ? ??7

??? 1

?

?

?

Market Index (M)

?????????? 12.0

? ? ? ? ? ? ? ?3

0.3

0.5

? 1

?

90-day Treasury Notes (Rf)

???????????? 5.0

?????????????? 0

0.3

0.2

?0.3

?? 1

?

The ?eta for Security A is:


Q2.Assuming the following for Asset A:

State of Economy

Probability

Return

Recession

0.3

0.03

Normal

0.5

0.07

Boom

0.2

0.15

?

The Standard Deviation of returns for Asset A is:


Q3,Assume the following for a two-asset portfolio:

Asset

Expected Return

Weight

1

0.07

0.5

2

0.13

0.5

?

The expected return on this portfolio is:


Q4.What is the beta of a share given that its correlation with the market is 0.369 and its standard deviation is 0.07, while the standard deviation of the market is 0.028??


Q5.The return on treasury notes is expected to be 3%. The market risk premium is 7%. What is the expected return on a stock with a beta of 0.9??


Q6.In calculating your answer for all of the questions below use up to a maximum of seven decimal places, then round-off to four decimal places for your final answer

?Do not express your answers in % form (i.e. enter 0.0231 instead of 2.31%)

Assume the following information:

Asset Beta Standard Deviation Correlation Coefficient
SABCo RMUT Co.
SABCo 1 0.029 1 0.3
RMUT Co. 0.98 0.03 0.3 1

Also assume that the rate of return on a 10-year Treasury Bond is 2.38% and that the expected return on the market portfolio is 5.62% p.a.?

a)What is the equilibrium rate of return on SABco?

b)What is the equilibrium rate of return on RMUT Co.?

c)What is the equilibrium return on a portfolio comprised of a 66% weighting in SABCo and the balance in RMUT Co.?

d)?What is the standard deviation of the portfolio constructed in Part C?

e)What is the systemic risk of the portfolio constructed in Part C??


Question 1

 

Matrix

 


 

Expected Return

 


 

Std. Dev.

 


 

Correlation Matrix

 


 

Security

 


 

(% p.a.)

 


 

(% p.a.)

 


 

A

 


 

A

 


 

B

 


 

M

 


 

15

 


 

7

 


 

1

 


 

12.0

 


 

3

 


 

0.3

 


 

0.5

 


 

1

 


 

90-day Treasury Notes (Rf)

 


 

5.0

 


 

0

 


 

0.3

 


 

0.2

 


 

0.3

 


 

The...

 

Paper#9256682 | Written in 27-Jul-2016

Price : $16
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