Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. the portfolio alpha has an expected return of 18.5

The portfolio Alpha has an expected return of 18.50% and risk of 60%. The portfolio...

50.1K

Verified Solution

Question

Accounting

The portfolio Alpha has an expected return of 18.50% and risk of 60%. The portfolio Gamma has an expected return of 11.75% and risk of 30%. The risk of market portfolio is 40%. Ms. Investor would like to create the portfolio Delta by utilizing the risk free rate and the market portfolio. However, she is interested in earning higher return than the one given by the market portfolio. She has her own wealth of $10,000 for the investment purpose. From her broker, she can borrow additional $4,000 at the risk free rate. Assume that the Capital Asset Pricing Model holds and Ms. Investor utilizes her maximum borrowing capacity, what are the expected return and risk of the portfolio Delta? [Hint: This problem is similar to Problem # 4 of Homework 7. Only difference is in the computation of weights.]

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

The Wildhorse Publications Textbook Company sells all of its books for $100 per book, and it...

Finance
Q

A crossover trial is a type of experiment used to compare two drugs. Subjects take one...

Statistics
Q

The mass of plants in a botany lab are normally distributed with a mean of 54...

Basic Math
Q

1) List two physiological ways in which camels respond to hot, arid conditions. Explain HOW and...

Medical Sciences
Q

Portuguese innovations included which of the following O full use of the compass full use...

Biology
Q

In primates, male and female reproductive strategies areOsimilar.shaped directly by sexual competition in both sexes.shaped...

Biology
Q

A ray of light which is initially horizontal passes through a glass cylinder of radius...

Physics
Q

Tiles containing the letters for the word "ENCYCLOPEDIA" are placed in a bag. If you...

Basic Math
Q

3 letters are typed without repetition What is the probability that all 3 will be...

Statistics
Q

3 Find values for b such that the triangle has no solutions A 24 a...

Algebra
Q

Answer the following questions, assuming that Citation recognizes revenue over time...

Accounting
Q

L&M Manufacturing produces a single product that sells for $16. Variable (flexible) costs per unit...

Accounting