Calculate the expected holding-period return

Assignment Help Finance Basics
Reference no: EM132136176

Question 1:

The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows:

 

Dividend

Stock Price

Boom

$2.00

$50

Normal economy

1.00

43

Recession

0.50

34

a. Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equally likely.

b. Calculate the expected return and standard deviation of a portfolio invested half in Business Adventures and half in Treasury bills. The return on bills is 4%.For Problems 12-16, assume that you manage a risky portfolio with an expected rate of return 0 and a standard deviation of 27%. The T-bill rate is 7%.

Question 2:

Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. (LO 5-3)

a. What is the expected return and standard deviation of your client's portfolio?

b. Suppose your rislcy portfolio includes the following investments in the given proportions:

Stock A

27%

Stock B

33%

Stock C

40%

What are the investment proportions of your client's overall pordolio, including the position in T-bills?

c. What is the Sharpe ratio (8) of your risky portfolio and your client's overall portfolio?

d. Draw the CAL of your portfolio on an expected return/standard deviation diagram. What is the slone of the CAL? Show the position of your client on your fund's CAL.

Verified Expert

This assignment is based on the concepts of financial management topic. In this provided task, there are main two questions, based on the financial derivatives. In the first problem, we have to manage a risky portfolio with an expected rate of return, Sharpe ratio and have to draw CAL. In the second problem, we have to evaluate the expected holding period return and standard deviation of the holding period return.

Reference no: EM132136176

You assess the rupee return dividend plus price of these

The stock of Gandaki Ltd. (GL) performs relatively well as compared to other stocks during recessionary periods. The stock of Tanahu Ltd. (TL), on the other hand, does well du

Write a short report that compares the business performance

Write a short report that compares the business' performance in 201X with that in 20XY regarding its liquidity, financial flexibility, operating capability and profitability

Identify the portfolio investment opportunities

FIN201 - Investment Management Assignment. You are required to select four emerging markets, identify the portfolio investment opportunities which they offer to funds manager

Explain accountant role in changing depreciation methods

ACC701 Financial Accounting Assignment Question. In your response highlight ethics & governance, accountant's role in changing depreciation methods, stakeholders and the impa

What is the present value of cash outflows

Fez Fabulous Fabrics wishes to acquire a $100,000 multifacet cutting machine. What is the present value of cash outflows for each of these alternatives, using the after-tax c

How you would analyze the situation to settle the issue

Research an article on a current event that centers on a controversial issue where the two sides are claiming opposing views. Then describe how you would analyze the situati

Prepare a report for the couple answering the issues

FIN2IFP Introduction to Financial Planning - what price range is the couple reasonably able to afford and accordingly how much will they be required to borrow from a bank?

Prepare a report analysing the financial statements - tata

Prepare a report analysing the financial statements of a chosen company. Your financial analysis should focus on the profitability, turnover and financial position of the or

Reviews

urv2136176

11/23/2018 1:36:20 AM

This solution was very good one with high marks, really appreciate the expert a lot. I passed the assignment. Thank you all for the help. The lecturer was happy with the assignment, thanks once more.

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd