6 Which of the following are true regarding poetfolio efficiency on the Markowit

Question

6 Which of the following are true regarding poetfolio efficiency on the Markowite Efficient Frontier is a viable portsolio given a level of accepted risk. I1. The Sharpe Optimal Portfolio is the one with the lowest volatility III. Any porfolio on the Investment Opportunity Set is a viable portfolio given a IV. The Sharpe Optimal Potfolio is the highest reward per unit of risk level of acceptod risá. land rv only a. h L. II, and IV only c 1 and IV only d Il and Ill only 7· 1135% when the market has thepus, when the market has returnal more than l0%, stock ABC has returned i returned less than 5% Sack ABC has retuned 31% when the market has returned between Sadini, seek ABC has returned 8.25% You have just akulated the return on Sick ABC to be chanced at next year's S&P; rotum will be b tuoen 5 and 1036 what is the probabili 9 425·If you think there is a 25% ty that the market return will be greater than 10%? 266% a. b. 484% e 16.3% d610% S. You have four assets in your portfolio. Asset A is a common stock that has a beta of 89, Asset B is a common stock that has a beta of 143. You also have a risk-free asset in your portfolio. Finally, you have an ETF that exactly follows the market. If you have S12,000, $8,000, S15,000, and $3,000 in Asscts A, B, the risk-froe, and the market ETF, what is your portfolio beta? b. 58 d. 53 9 Over the past 30 years, your portfolio has anaverage return your expected loss for the next six months with the prob bility of 5%? ril%and an average standard deviation of what is a b. c. d. -52.07% -35.21% -43 0196 -21.98% have calculated an expected return on your portfolio of 15.34% The actual return is 18.41%, while the actual retumon the market was 17.24%. You espected the return on the market to be only 12%, The portion of the return is 1.84%. what was your portfolio beta? mytmile a 1.93 b. 23 d. 1.12

Explanation / Answer

7)

stock return = 9.42%

let x be probability of s&p return greater than 10%

expected return = 9.42%

=>

(1- 0.25 - x) * 3.1% + 0.25 * 8.25% + x * 11.35% = 9.42%

=>

0.75 * 3.1% - x*3.1% + 0.25 * 8.25% + x * 11.35% = 9.42%

=>

x = 0.61 or 61%

hence choose d)

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