Reference no: EM131945668
Financial Concepts Portfolio Theory, CAPM Homework
For this exercise, you might want to copy and paste the table into Excel and then do all your calculations on that spreadsheet.
|
Rate of Return
|
|
Year
|
Asset A
|
Asset B
|
Market
|
|
1
|
20.0%
|
19.0%
|
9.0%
|
|
2
|
-11.0%
|
22.0%
|
12.0%
|
|
3
|
10.0%
|
-6.0%
|
6.0%
|
|
4
|
-9.0%
|
-14.0%
|
-4.0%
|
|
5
|
21.0%
|
28.0%
|
17.0%
|
1) Calculate the expected returns for Asset A, Asset B and the Market (use Average function in Excel)
Asset A =
Asset B =
Market =
2) Calculate the standard deviation of returns, ?, for each asset (use STDEVP function)
Asset A =
Asset B =
Market =
3) Calculate the correlation, ρ, between Asset A and Asset B (use CORREL function in Excel)
ρ =
4) Calculate the expected returns from the following portfolios:
Use the following formula to calculate the portfolio standard deviation
σP =√ (wAσA)2 + (wBσB)2 +(2 wA wB σA σB ρ(A,B))
=(((wA*σA) ^ 2) + ((wB *σB) ^2)+(2 *wA* wB *σA *σB *ρ(A,B))))^.5
Where wA and wB are the % of assets in Asset A and B respectively σA and σB are the respective standard deviations of return and ρ(A,B)).is the correlation of returns between asset A and B
|
|
Portfolio Expected Return
|
Portfolio Std Dev.
|
|
% Asset A
|
% Asset B
|
|
|
|
0%
|
100%
|
|
|
|
25%
|
75%
|
|
|
|
50%
|
50%
|
|
|
|
75%
|
25%
|
|
|
|
100%
|
0%
|
|
|
5) Using Portfolio Expected Returns on the Y axis and Portfolio Standard Deviation in the X axis, draw the efficient frontier for possible portfolio combinations of Asset A and B. (include 100% A and 100% B as two possibilities). Hint: Use the Excel Chart Wizard and select the XY(scatter) plot option)
6) Calculate Beta for Asset A (relative to the Market) and Asset B relative to the Market) (use SLOPE function)
Beta for Asset A =
Beta for Asset B =
7) Assume that for next year the Risk Free Rate is expected to be 2% and that the overall Market will realize a return of 12%. Using the CAPM / SML methodology, calculate the required returns for Asset A and Asset B.
Required Return for Asset A =
Required Return for Asset B =
|
Create a parameter query that asks user to provide an input
: Create a calculated field in at least two of the queries in yourdatabase. Create a parameter query that asks the user to provide an input.
|
|
What is the projected dividend for next year
: Company A has projected net income per share for this year at $3.80 per share. What is the projected dividend for next year
|
|
Examine the depictions of women that we see in medieval
: Examine the depictions of women that we see in Medieval, Renaissance, and Colonial literature. Do the depictions change over time?
|
|
Describe the dilemma
: In your introduction, describe the dilemma, making sure to include the different perspectives or positions.
|
|
Calculate the required returns for asset a and asset b
: Assume that for next year the Risk Free Rate is expected to be 2%, calculate the required returns for Asset A and Asset B
|
|
Anlalyze company account
: Anlalyze companys accounts (valuation of assets, inventories,depreciation method,leasses etc) and relate it to the AASB, significant accounting policies
|
|
How the author illustrates the social construction of racism
: What did Peggy McIntosh mean when she said, "I was taught to recognize racism only in individual acts of meanness by members of my group." (page 5)?
|
|
Define a class tweet to represent one tweet
: Define a class Tweet to represent one tweet, analogous to thePost class in the Facebook problem set. Be sure to remove punctuation when deciding what a word is.
|
|
What types of services do assisted living facilities offer
: What types of services do assisted living facilities offer? What types of clients do they serve? What are the common sources of reimbursement for assisted.
|