Purchase Solution

Expected Return and Risk and Portfolios

Not what you're looking for?

Ask Custom Question

1) What has been the expected return and risk for the S&P 500 during that time period (average annual return and standard deviation)?

2) How does the portfolio 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 be the characteristics of this portfolio be (E(R),S)?

4) Which portfolio would you recommend to your client? The one created in above (1 above) or the portfolio in (4) explain your reasoning

Attachments
Purchase this Solution
Solution Summary

This solution involves calculations for expected return and risk and various questions about portfolios.

Solution Preview

1) What has been the expected return and risk for the S& P 500 during that time period (average annual return

and standard deviation?)

Please refer to EXCEL for calculation, the expected annual return for the S& P 500 is

E(R) = 0.108 = 10.8%
Its standard deviation is S = 0.199

2) How does the portfolio fair compared to the S&P 500? Explain

Because in this question we need to compare average annual returns, so we should change the monthly returns

into annual term and the new result is calculated in the "portfolio..." file.
In this way, the portfolio's expected ANNUAL ...

Purchase this Solution
Free BrainMass Quizzes
Measures of Central Tendency

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

Terms and Definitions for Statistics

This quiz covers basic terms and definitions of statistics.

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.

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.

View More Free Quizzes
Related BrainMass Solutions

  • Portfolios

    (B) Expected return of securities to expected return of portfolios. (C) Efficient sets of portfolios to the risk-free rate. (D) Expected return to beta 9.

  • Investing in Market Based Portfolio

    118655 Dividend yields and expected capital gains 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.

  • expected return on these portfolios

    354652 expected return on these portfolios Assume that both X and Y are well-diversified portfolios and the risk free rate is 8%. Portfolio X has an expected return of 14% and a beta 1. Portfolio Y has an expected return of 9,5% and beta 0,25.

  • Markowitz Efficient Frontier

    (See either of the attached files for the graph) The solution answers which portfolio is not on Markowitz Efficient Frontier, given expected return and standard deviation of return.

  • Beta, Cost of Equity, Style portfolios

    If the expected return on the market is 10% and the risk-free rate is 5%, then the equity beta is 0.68_ Required return = risk free rate + beta x (return on market - risk free rate) Or 8.4 % = 5% + beta x (10% - 5%) Or beta = (8.4 % - 5%) / (10%

  • Basic financial terms and APT 2-factor models

    An efficient frontier is composed of the set of efficient portfolios available to the investor, reliant on the portfolios giving the highest expected return for a specific risk level, and the portfolios giving the lowest risk for a targeted expected return

  • Finance: Evalulate Jane's Three Possible Investments in Stock

    Calculate the standard deviations for portfolios AB, AC, and BC. e. Would you recommend that Jane invest in the single stock A or the portfolio consisting of stocks A and B? Explain your answer from a risk return viewpoint. f.

  • Optimal risky portfolio

    0.9 and 0.1; Expected return = 0.24; Standard Dev.= 0.45 You are informed that one of these portfolios is "optimal risky portfolio".

  • Expected return and standard deviation of portfolios

    113180 Expected return and standard deviation for security, minimum risk portfolio, efficient frontier of the feasible set.

  • Investment Decision Questions

    Q4 Assume that both X and Y are two well-diversified portfolios, and that the risk-free rate is 8%. Portfolio X has an expected return of 14% and a beta of 1.00. Portfolio Y has an expected return of 9.5% and a beta of 0.25.

View More Related Solutions