Explore BrainMass

Explore BrainMass

    Sensitivity of the portfolios: calculate the risk rate.

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Based on a three-factor model, consider a portfolio composed of three securities with the following characteristics:

    Security Factor 1 Sensitivity Factor 2 Sensitivity Factor 3 Sensitivity Proportion

    A -0.2 3.6 0.05 0.6
    B 0.5 10 0.75 0.2
    C 1.5 2.2 0.3 0.2

    What are the sensitivities of the portfolio to factors 1, 2, and 3?

    Based on a one-factor model, two proportions, A and B, have equilibrium expected returns of 9.8% and 11.0% respectively. If the factor sensitivity of portfolio A is .8 and that of portfolio B is 1.0, what must the risk rate be?

    © BrainMass Inc. brainmass.com March 4, 2021, 6:24 pm ad1c9bdddf
    https://brainmass.com/business/finance/sensitivity-portfolios-risk-rate-43378

    Solution Summary

    The solution displays all the formulas and calculations to arrive at the correct responses to the problem questions.

    $2.49

    ADVERTISEMENT