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An investor wishes to construct a portfolio by borrowing 30 percent of his initial wealth at the risk-free rate of 3 percent and investing all the money in a stock index. The expected return on the stock index is 12 percent. Calculate the expected return on the portfolio.

Exhibit 6.11 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)   Asset 1 Asset 2 E(R1) = 0.28 E(R2) = 0.12 E(s1) = 0.15 E(s2) = 0.11 W1 = 0.42 W2 = 0.58 r1,2 = 0.7   Refer to Exhibit 6.11. Calculate the expected standard deviation of the two-stock portfolio.

Assume that as a portfolio manager the beta of your portfolio is 1.4 and that your performance is exactly on target with the SML data under condition 1. If the true SML data is given by condition 2, how much does your performance differ from the true SML?   (1) RFR = .06 Rm(proxy) = .12 (2) RK = .05 Rm(true) = .11

Calculate the expected return for E Services, which has a beta of 1.5 when the risk-free rate is 0.05 and you expect the market return to be 0.11.  

Exhibit 6.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)   Asset (A) Asset (B) E(RA) = 25% E(RB) = 15% (sA) = 18% (sB) = 11% WA = 0.75 WB = 0.25 COVA,B = -0.0009   Refer to Exhibit 6.2. What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation (si), covariance (COVi,j), and asset weight (Wi) are as shown above?  

Exhibit 18.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)   The portfolios identified below are being considered for investment. Assume that during the period under consideration, Rf = .04.   Portfolio Return Beta s W 0.18 1.8 0.06 X 0.21 0.9 0.10 Y 0.13 0.7 0.03 Z 0.16 1.5 0.07    Refer to Exhibit 18.2. Using the Sharpe Measure, which portfolio performed best?

What is the expected return of the three-stock portfolio described below?   Common Stock Market Value Expected Return Lupko Inc. 50,000 13% Mackey Co. 25,000 9% Nippon Inc. 75,000 14%

The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a six-month period. Month Madison Cookies Sophie Electric 1 [x1] [y1] 2 [x2] [y2] 3 [x3] [y3] 4 [x4] [y4] 5 [x5] [y5] 6 [x6] [y6] Compute the correlation between the stocks. Do not round intermediate calculations. Round your answers to four decimal places. Example: 0.0156  

Exhibit 7.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)   You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks.   ​ ​ Current Expected Expected Stock Beta Price Price Dividend X 1.25 $20 $23 $1.25 Y 1.50 $27 $29 $0.25 Z 0.90 $35 $38 $1.00     Refer to Exhibit 7.2. What are the expected (required) rates of return for the three stocks (in the order X, Y, Z)?

Exhibit 18.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)   The portfolios identified below are being considered for investment. Assume that during the period under consideration, Rf = .04.   Portfolio Return Beta s W 0.18 1.8 0.06 X 0.21 0.9 0.10 Y 0.13 0.7 0.03 Z 0.16 1.5 0.07    Refer to Exhibit 18.2. According to the Treynor Measure, which portfolio performed best?