Calculate the expected return and variance

Assignment Help Finance Basics

Reference no: EM131303331

Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 80 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 20% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 5%.

1. Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index with weights as follows:

i. Calculate the utility levels of each portfolio of Question 1 for an investor with A = 2. What do you conclude?

ii. Repeat Question for an investor with A = 3. What do you conclude?

Use these inputs for Questions 2: You manage a risky portfolio with expected rate of return of 18% and standard deviation of 28%. The T-bill rate is 8%.

2. Your client chooses to invest 70% of a portfolio in your fund and 30% in a T-bill money market fund. What is the expected value and standard deviation of the rate of return on his portfolio?

Reference no: EM131303331

Questions Cloud

Where marginal cost and marginal revenue are equal : If so, how can that be done? If the concept is applied, how confident should we be that the firm will achieve the point where marginal cost and marginal revenue are equal

What values do you obtain for the slope and y-intercept : What values do you obtain for the slope and y-intercept? Give the values in scientific notation with five digits of accuracy (use format short e) -

Economic growth and development : In the early modern period in Western Europe 1500-1750, France was big, Spain wasrich, The Netherlands was efficient, and China and India with their large populationsdominated world economic production. What then was Britain's competitive advantag..

What does white-collar crime reveal about power and deviance : What does white-collar crime (found in the examples of Enron and the 2008 financial crisis) reveal about power and deviance? How does this relate to other forms of criminal behaviors and the punishment established?

Calculate the expected return and variance : Calculate the expected return and variance of portfolios invested in T-bills and the S&P 500 index with weights as follows: Calculate the utility levels of each portfolio of Question 1 for an investor with A = 2. What do you conclude

What is the aggregate level of deposits in the economy : a. What is the aggregate level of deposits in the economy? b. Write down the money market-clearing condition. Compute the equilibrium price level. c. What is the aggregate level of real money balances in the economy? d. Compute the money multiplier.

Find out how many of each coins eric has : Eric has 130 coins consisting of nickles and quarters. the coins combined value comes to 15.90. Find out how many of each coins Eric has?

What are 2 virtues that you believe are important to living : What are 2 virtues that you believe are important to living a flourishing or successful life in either Aristotle's sense? Explain what goods in human life these virtues enable their possessor to fulfill. Provide examples of characteristic behavi..

Write a polynomial that describes the area of shaded figure : Write a polynomial that describes the area of the shaded figure. Show the steps mathematically and explain each step in words. The shaded figure is the rectangle in grey minus the white rectangle.

User Account

All Pages