Use the following information to answer the questions below. (10 marks)
Security Return Standard Deviation Beta
A 15% 8% 1.2
B 12% 14% 0.9
a. Which of A and B has the least total risk? The least systematic risk?
b. What is the value of systematic risk for a portfolio with 75% of the funds invested in A and 25% of the funds invested in B?
c. Calculate the risk free rate of return and the market risk premium
d. What is the portfolio expected return and the portfolio beta if you invest 30% in A, 30% in B, and 40% in the risk-free asset?
(For questions (d) and (e), assume the risk free rate of return is 5%.)
e. What is the portfolio expected return with 125% invested in A and the remainder in the risk-free asset via borrowing at the risk-free interest rate?
f. What is the beta of the portfolio created in part (e)?
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more