Business, 01.07.2021 20:50 pennygillbert

Suppose that the CAPM holds and correctly priced all assets in the financial market. Consider the following probability distribution of returns on portfolio P and the market portfolio. State of Economy Probability Portfolio P Market
Boom 0.2 15% 10%
Normal 0.6 10% 6%
Bust 0.2 -5% 2%
a. Suppose that another well-diversified portfolio K has a beta of 1.5, and its standard deviation of the error term is zero. What are portfolio K's expected return and Treynor ratio?
b. Based on her risk preference, a rational mean-variance optimizing investor under the CAPM intends to have a target risk (i. e., standard deviation), which is only a half of that of the market portfolio. Determine the expected return for her (complete) portfolio.
c. Stock C has a beta of 0 and a return standard deviation of 6%. What is the minimum return standard deviation of a two-asset portfolio consisting of stock C and the market portfolio?

Answers: 3

Show answers

Another question on Business

Business, 22.06.2019 10:00

Employees at a library check out books to patrons. books have an isbn and a name. the library sometimes has multiple copies of the same book. books have one or more authors. a patron is an individual who has an active (non-expired) library card. for each library card, we store the person's first and last names and their address. for each employee, we store their employee id, current salary, first and last name and their address. we also store the employee id of their current manager. each time we check out a book to a patron we need to store the date of the transaction, the employee who checked out the book to the patron, and the library card of the patron. some employees have library cards. if an employee patron turns in a book late, the fine that they pay is a percentage of their salary. some employees are authors who have library cards—they are allowed to check out as many books as they like.

Answers: 1

Answer

Business, 22.06.2019 22:00

Anheuser-busch inbev is considering you for an entry-level brand management position. you have been asked to prepare an analysis of the u.s. craft beer industry as part of the selection process. prepare a 3-5 page report that includes a description of the industry’s strategically relevant macro-environmental components, evaluates competition in the industry, assesses drivers of change and industry dynamics, and lists industry key success factors. the company’s management also asks that you propose the basic elements of a strategic action plan that will allow the company to improve its competitive position in the market for craft beer. you must provide a heading in your report for each of the required elements of the assignment.

Answers: 3

Answer

Business, 23.06.2019 00:00

Wo firms, a and b, each currently dump 50 tons of chemicals into the local river. the government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. it costs firm a $100 for each ton of pollution that it eliminates before it reaches the river, and it costs firm b $50 for each ton of pollution that it eliminates before it reaches the river. the government gives each firm 20 pollution permits. government officials are not sure whether to allow the firms to buy or sell the pollution permits to each other. what is the total cost of reducing pollution if firms are not allowed to buy and sell pollution permits from each other? what is the total cost of reducing pollution if the firms are allowed to buy and sell permits from each other? a. $3,000; $1,500 b. $4,500; $3,500 c. $4,500; $4,000 d. $4,500; $2,500

Answers: 3

Answer

Business, 23.06.2019 01:00

Gideon company uses the allowance method of accounting for uncollectible accounts. on may 3, the gideon company wrote off the $2,000 uncollectible account of its customer, a. hopkins. on july 10, gideon received a check for the full amount of $2,000 from hopkins. on july 10, the entry or entries gideon makes to record the recovery of the bad debt is

Answers: 1

Answer

You know the right answer?

Suppose that the CAPM holds and correctly priced all assets in the financial market. Consider the fo...

Questions