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FINS2624-Portfolio Mgmt - T2 2025
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Every time a certain asset A sees a 1 percent jump in its rate of return, the return on asset B sees also exactly a 0.25 percent jump (with no error). What is the correlation coefficient between the returns of these two assets?
You are evaluating portfolio choices under the framework of mean-variance analysis. The optimal risky portfolio P* has:
- An expected return of 12.5%
- A standard deviation of 25%
The current risk-free rate in the market is 2.0%.
Investor C is conservative and holds an optimal complete portfolio with expected return of 8.3%. What is the standard deviation of Investor C’s optimal complete portfolio?
Assume a risk-neutral investor who wants to maximize her expected utility. Which one of the following investment alternatives would she choose?
You are evaluating portfolio choices under the framework of mean-variance analysis. The optimal risky portfolio P* has:
- An expected return of 12.5%
- A standard deviation of 25%
The current risk-free rate in the market is 2.0%.
Investor A is aggressive and chooses an optimal complete portfolio with a standard deviation of 28%. What is the expected return of Investor A’s optimal complete portfolio?
Your client, John Smith, holds a complete portfolio that consists of a portfolio of risky assets ( ) and T-Bills. The information below refers to these assets.
E(Rp)
|
12.00%
|
Standard Deviation of P
|
7.20%
|
T-Bill rate
|
3.60%
|
|
|
Proportion of Complete Portfolio in P
|
70%
|
Proportion of Complete Portfolio in T-Bills
|
30%
|
|
|
Composition of P:
|
|
Stock A
|
35%
|
Stock B
|
25%
|
Stock C
|
40%
|
Total
|
100%
|
What are the proportions of stocks A, B, and C,
respectively, in John's complete portfolio?
Which one of these return-variance combinations is the dominant one?
Suppose you observe the situation in the table below. Calculate the expected return on equity A.
|
|
Return if State Occurs
| |
State of Economy
|
Probability of State
|
Equity A
|
Equity B
|
Bust
|
0.25
|
-0.10
|
-0.30
|
Normal
|
0.50
|
0.10
|
0.05
|
Boom
|
0.25
|
0.20
|
0.40
|
A portfolio has an expected rate of return of 15% and a standard deviation of 15%. The risk-free rate is 6%. An investor has the following utility function: U = E(r) - (A/2) σ . Which value of A makes this investor indifferent between the risky portfolio and the risk-free asset?
The standard deviation of returns of stock X is 30% and that of stock Y is 30%. Suppose the correlation between these two stocks is -1. When I hold both stocks in my portfolio with an equal proportion in each, what is the overall standard deviation of returns of the portfolio?
An investor has preferences represented by the utility function . What is her certainty equivalent utility for a portfolio with an expected return of 10% and a standard deviation of 15%?