Standard deviation-create your optimal complete portfolio

Assignment Help Financial Management
Reference no: EM13882158

Stock A has a standard deviation equal to 20% and an expected return of 11%. Stock B has a standard deviation equal to 25% and an expected return of 14%. The correlation coefficient of the returns on Stock A and Stock B is 50%. The risk-free rate is equal to 3%. Your optimal complete portfolio of ORP and the risk-free asset has an expected return equal to 7.70%

How much must you invest in ORP to create your optimal complete portfolio?

Reference no: EM13882158

Questions Cloud

Making deposits into fund continuously at rate : Max starts making deposits into a fund continuously at a rate of (19-2t). He will be making deposits until time t=7. This fund credits a force of interest of 2.1%. Calculate the present value of this fund two ways: one method should use an Increasing..
Find the estimators of ß1 and a1 . are they identical : Consider the following formulations of the two-variable PRF:Model I: Yi = β1 + β2 Xi + ui ,Model II: Yi = α1 + α2 ( Xi - X¯ ) + ui - Find the estimators of β1 and α1 . Are they identical? Are their variances identical?
Financial company that advertises on television : A financial company that advertises on television will pay you $61,000 now for annual payments of $9,400 that you are expected to receive for a legal settlement over the next 11 years. Assume you estimate the time value of money at 12 percent.
What will be the value of her retirement account : Carla Lopez deposits $9070 a year into her retirement account. If these funds have an average earning of 7 percent over the 15 years until her retirement, what will be the value of her retirement account?
Standard deviation-create your optimal complete portfolio : Stock A has a standard deviation equal to 20% and an expected return of 11%. Stock B has a standard deviation equal to 25% and an expected return of 14%. The correlation coefficient of the returns on Stock A and Stock B is 50%.  How much must you inv..
What are steven rights and duties : Steven enters into a contract with Mandy. The contract is for Mandy to repair Steven's car for $600. What are Mandy's rights and duties? What are Steven's rights and duties
Create your optimal complete portfolio : Stock A has a standard deviation equal to 20% and an expected return of 11%. Stock B has a standard deviation equal to 25% and an expected return of 14%. The correlation coefficient of the returns on Stock A and Stock B is 50%. How much must you inve..
Diversified portfolio consisting : You hold a diversified portfolio consisting of a $10,000 investment in each of 15 different common stocks (i.e., your total investment is $150,000). The portfolio beta is equal to 1.1. You have decided to sell one of your stocks which has a beta equa..
What is the expected return of the optimal portfolio : Stock A has a standard deviation equal to 20% and an expected return of 11%. Stock B has a standard deviation equal to 25% and an expected return of 14%. The covariance of the returns on Stock A and Stock B is 0.0100. What is the expected return of t..

Reviews

Write a Review

Financial Management Questions & Answers

  Acquire a company within the european union

Would you seek to acquire a company within the European Union or outside of it and describe the advantages and disadvantages of the choice you made - describe the advantages and disadvantages inherent in the option you did not choose.

  Process the ore from planned mining operation

You are considering constructing a new plant in a remote wilderness area to process the ore from a planned mining operation. You anticipate that the plant will take a year to build and cost $99 million upfront. Using a cost of capital of 12%, what is..

  1 evaluate the performance of a company using various

1. evaluate the performance of a company using various financial analytical tools.2. analyse different patterns of

  Estimated quarterly sales for next year

Kennedy's has the following estimated quarterly sales for next year. Projected first quarter sales $11,400, second quarter $13,200, third quarter $15,800 & fourth quarter $12,700. The accounts receivable period is 70 days. What is the expected accoun..

  Draft an income statement and statement of cash flows

On January 3, 2013 Mandy MacMahaninvested $500,000 to open her first restaurant Alabama Barbecued Chicken in her hometown in Alabama.  Her town is known to be a trucker stop and a tourist destination as it has several antique and preserved landmarks ..

  Debt with both face and market value

Salmon Inc. has debt with both a face and a market value of $3,000. This debt has a coupon rate of 7% and pays interest annually. The expected earnings before interest and taxes is $1,200, the tax rate is 34%, and the unlevered cost of capital is 12%..

  What is the expected nominal interest rate

Assume investors expect a 2.0 percent real rate of return over the next year. If inflation is expected to be 0.5 percent, what is the expected nominal interest rate for a one-year U.S. Treasury security?

  Is there difference between price and value

What is the right price for a stock? Is it book value, liquidation value or simply its market price at a given moment in time? Would you value a privately-owned company where there is no market value differently than a publicly owned company where th..

  What is the projected dividend for the coming year

Frey Corp. is experiencing rapid growth. Dividends are expected to grow at 25 percent per year during the next three years, 15 percent over the following year, and then 7 percent per year indefinitely. The required return on this stock is 12 percent,..

  What is a tranche

Explain how the design of a CMO supposedly helps to manage prepayment risk for investors. What is a tranche?

  What is the target stock price in one year

Fly Away, Inc., has balance sheet equity of $6.9 million. At the same time, the income statement shows net income of $855,600. The company paid dividends of $419,244 and has 120,000 shares of stock outstanding. If the benchmark PE ratio is 33, what i..

  Considering using the payback period for capital-budgeting

Your company (Apple Inc) is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique. Your company (Apple Inc) is considering the construction of a new building. The building will have an ..

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