Purchase Solution

Assets: Minimum Variance Portfolio; Yield Expected Return

Not what you're looking for?

Ask Custom Question

Questions

Assume that there are three assets available. A is a risk-free asset with that yields a rate of 8%. The other two assets, B and S are risky asset with the following attributes.

Asset Expected Return Standard deviation
A
B 12% 15%
S 20% 30%

Correlation between assets B and S is 0.1.

Question 1:
To determine the investment proportions in the minimum-variance portfolio of the two risky assets, the expected value and standard deviation of its rate of return. I did the following : {see attachment}

Question 2:
To draw the investment opportunity set of the two risky funds. I used investment proportions for the stock funds of zero to 100% in increments of 20%.
Tabulate the investment opportunity set of the two risky funds {see attachment}
Draw the investment opportunity set of the two risky funds {see attachment}

Question 3:
If using only risky assets S, and B, to set up portfolio to yield an expected return of 14%, I did the following {see attachment}

Question 4:
Using all three assets A, B, and S, how can I set up portfolio to yield an expected return of 14%? What would be the standard deviation this portfolio? What proportion of each asset invested?

Question 5:
Assuming the borrowing is not allow, to construct a portfolio of only risky assets S, and B, with an expected return of 24%. What would be appropriated portfolio proportions? Consequently, what are their standard deviations? If the borrowing is allowed at the risk free rate, how much less the standard deviation would be?

Attachments
Purchase this Solution
Solution Summary

Assets are explained. Minimum variance portfolio and yield expected return is discussed.

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
Recent Feedback
  • "Your explanation to the answers were very helpful."
  • "What does 1 and 0 means in the repair column?"
  • "Went through all of the formulas, excellent work! This really helped me!"
  • "try others as well please"
  • "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
Purchase this Solution
Free BrainMass Quizzes
Measures of Central Tendency

This quiz evaluates the students understanding of the measures of central tendency seen in statistics. This quiz is specifically designed to incorporate the measures of central tendency as they relate to psychological research.

Terms and Definitions for Statistics

This quiz covers basic terms and definitions of statistics.

Measures of Central Tendency

Tests knowledge of the three main measures of central tendency, including some simple calculation questions.

Know Your Statistical Concepts

Each question is a choice-summary multiple choice question that presents you with a statistical concept and then 4 numbered statements. You must decide which (if any) of the numbered statements is/are true as they relate to the statistical concept.

View More Free Quizzes
Related BrainMass Solutions

  • Expected Return and Standard Deviation of Portfolio Caclulations

    d) Finds the minimum variance portfolio and its expected return if the two assets are perfectly negative correlated.

  • Portfolio Optimization Questions

    return and the standard deviation of the minimum variance portfolio of A and B, when short-selling is allowed.

  • Assets - Investment Proportions in Minimum-Variance Portfoli

    To determine the investment proportions in the minimum-variance portfolio of the two risky funds, the expected value and standard deviation of its rate of return. I did the following ... {see attachment} See the file

  • Risk of Finance, Portfolio, Investments

    To determine the standard deviation/variance of a portfolio: The variance of a portfolio's return is the expected value of the squared deviation of the actual return from the portfolio's expected return.

  • Portfolio Investment Yield

    29961 Portfolio Investment Yield Please view the attached file. a. Provide one set of weights for a portfolio of all three assets that will deliver a return of 18%. b.

  • Optimal Portfolio for an Investor

    P3 is minimum variance portfolio. Efficiency Frontier represents a location of efficient portfolios, i.e. those portfolios that maximise expected return for a given variance.

  • tocks

    Plot A and B in expected return-standard deviation space and draw (approximately) the feasible set for P. On this diagram, mark the minimum variance portfolio and the efficient set. c.

  • Efficient Frontier Using Portfolios

    (2) Identify the minimum variance portfolio. (3) If the risk-free rate of return is 7%, what is the "market portfolio?" Do the same for 2%. Explain, briefly, the significance of the market portfolio in this context.

  • Portfolio Weights, Expected Returns, and Standard Deviation

    This in the minimum variance portfolio. What are the portfolio weights, expected return, and standard deviation of this portfolio? Why is the minimum variance portfolio important? Excel results.

View More Related Solutions