Discuss the risk and return characteristics of a portfolio

Please see the attached file.

Risk

Discuss the risk and return characteristics of a portfolio in terms of correlation and diversification, and the impact of international assets on a portfolio.

Discuss the management of receipts and disbursements, including floats, speeding collections, slowing payments, cash concentration, zero-balance accounts, and investing in marketable securities.

Capital Structure

Discuss the return and risk of alternative capital structures, their linkage to market value, and other important considerations related to capital structure.

The degree and direction of correlation between return have far reaching effects on the reduction of portfolio through diversification. The value of correlation takes value or varies between the positive and negative entity. Positive correlation between returns pays a direct relationship between risk and return of portfolio and on the other side, when assets with negative correlated between their returns are combined in different ratios, the relationship between the risks and return characteristic of a portfolio shapes a 'V' image. The more negative and less positive is the correlation between asset returns the greater risk reducing benefits of diversification. If the investor invests its wealth in more than one security reduces portfolio risk. This is attributed to diversification effects. The international assets have positive impact on assets because it increases the international assets on portfolio that ultimately reduce the risk and offer higher return (Van Horne, Wachowicz, & Bhaduri, 2008).

Time value of Money

Future Value: Future value of money refers to a particular amount of money to be matured in future by calculating on the basis of a specified interest rate (Van Horne, Wachowicz, & Bhaduri, 2008).
FV = PV(1+k)^n

For calculating the future value of single cash low compounded ...

Solution Summary

The response addresses the queries posted in 822 Words, APA References.

An investor is considering a two-asset portfolio. Stock A has an expected return of $4.50 per share with a standard deviation of $1.00, while stock B has an expected return of $3.75 with a standard deviation of $0.75. The covariance between the two stocks is -0.35. Find theportfoliorisk if:
a) the stocks are weighted equal

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Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 11% and 14%, respectively. The beta of A is 0.8, while that of B is 1.5. The T-bill rate is currently 6%, whereas the expected rate of return of the S&P 500 index is 12%. The standard deviation of portfolio A is 10

Problem: You are planning to invest $200,000. Two securities X and Y are available, and you can invest in either of them or in a portfolio with some of each. The correlation coefficient is of X and Y is -0.50. Assuming the following additional data, calculate the weight of A in theportfolio that produces the minimum risk po

Consider the following information about a five stock portfolio:
Stock Percent of Portfolio Beta
A) 20% 1.6
B) 25% 1.2
C) 10% 1.0
D) 30% 0.9
E) 15% 0.8
a. Determine theportfolio beta for the above portfolio. Show all work.
b. Determine the expected return on theportfolio based on a Treasury bill yield of 4%

1) What has been the expected returnandrisk for the S&P 500 during that time period (average annual returnand standard deviation)?
2) How does theportfolio fair compare to the S&P 500? Explain.
3) Your client has $50,000 to invest and you plan to invest 60% in the security with the highest expected return. What would b

Rate of Return
Scenario Probability Stocks Bonds
Recession 0.20 -5% 14%
Normal Economy 0.60 15% 8%
Boom 0.20 25% 4%
Use the data in the above problem a

The Bank of Tinytown has two $20,000 loans with the following characteristics: Loan A has an expected return of 10% and a standard deviation of returns of 10%. The expected returnand standard deviation of returns for loan B are 12% and 20%, respectively.
a) If the covariance between loan A and B is 0.015 (1.5%) what are th

Assume that therisk free rate of return is 3% andthe market portfolio on the capital market line (CML) has an expected return of 11% and a standard deviation of 14%. How should you invest $100 000 if you are only willing to accept a total portfoliorisk of 8%?