{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

PracticeSet3

PracticeSet3 - Finance 261 Practice Set 3 Supplementary...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Finance 261 Practice Set 3 – Supplementary Examples 1. Assume the risk free rate is 7%, the estimated return on the market is 12% and the standard deviation of the market’s expected return is 21%. Calculate the expected return and risk (standard deviation) for the following portfolios: (a) 60% of investable wealth in risk free assets, 40% in the market portfolio (b) 150% of investable wealth in the market portfolio. (c) 100% of investable wealth in the market portfolio 2. Assume that the shares of CCL are priced in equilibrium. The company’s expected return next year is 14% and its beta is 1.1. The risk free rate is 6%. (a) Calculate the slope of the SML. (b) Calculate the expected return on the market. 3. Choose the portfolio from the following set that is not on the efficient frontier a. Portfolio A: E(R) = 10%, σ = 8% b. Portfolio B: E(R) = 18%, σ = 13% c. Portfolio C: E(R) = 38%, σ = 32% d. Portfolio D: E(R) = 15%, σ = 14% e. Portfolio E: E(R) = 26%, σ = 20% 4. Given the following information: E(R m ) = 10%, σ m = 23%, R f = 6%, σ A = 20% ρ AB = .65 σ B = 31% , ρ A,M = .9, ρ B.M = .5 a) Calculate the betas for each of securities A and B.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern