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Chapter 6 8. 1.The parameters of the opportunity set be: E(rS) = 15%, E(rB) = 9%, sS = 32%, sB = 23%, r = 0.15, rf = 5.5% From the standard recreations and the correlational statistics coefficient we generate the covariance matrix [note that Cov(rS, rB) = rsSsB]: BondsStocks Bonds529.0110.4 Stocks110.41024.0 The minimum-variance portfolio proportions atomic number 18: wMin(B) = 0.6858 The inculpate and standard excursus of the minimum variance portfolio argon: E(rMin) = (0.3142 × 15%) + (0.6858 × 9%) = 10.89% = [(0.31422 × 1024) + (0.68582 × 529) + (2 × 0.3142 × 0.6858 × 110.4)]1/2 = 19.94% % in stocks% in bondsExp. returnStd dev. 00.00100.009.0023.00 20.0080.0010.2020.37 31.4268.5810.8919.94 tokenish variance 40.0060.0011.4020.18 60.0040.0012.6022.50 64.66 35.3412.8823.34 touch portfolio 80.0020.0013.8026.68 100.0000.0015.0032.00 9. 1. The graph approximates the points: E(r)? Minimum Variance Portfolio10.89%19.94% Tangency Portfolio12.88%23.34% 10. The reward-to-variability ratio of the optimal CAL (using the link portfolio) is: 11. a.The par for the CAL using the middleman portfolio is: aspect E(rC) equal to 12% yields a standard expiration of: 20.56% b.

The bastardly of the complete portfolio as a function of the proportion invested in the risky portfolio (y) is: E(rC) = (l - y)rf + yE(rP) = rf + y[E(rP) - rf] = 5.5 + y(12.88 - 5.5) Setting E(rC) = 12% ==> y = 0.8808 (88.08% in the risky portfolio) 1 - y = 0.1192 (11.92% in T-bills) From the paper of the optimal risky portfolio: proportion of stocks in complete portfolio = 0.8808 × 0.6466 = 0.5695 comparison of bonds in complete portfolio = 0.8808 × 0.3534 = 0.3113 12. 1.Using exclusively the stock and bond property to achieve a mean of 12% we solve: 12 = 15wS + 9(1 - wS) = 9 + 6wS Þ wS = 0.5 Investing 50% in stocks and 50% in bonds yields a mean of 12% and standard deviation of: sP = [(0.502 × 1024)...If you fate to get a honest essay, order it on our website: Ordercustompaper.com

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