Assume that risk free (money market fund) pays 2.0% and that the margin borrowing rate (should you need to borrow) is 7%. Further, the Market Expected Return is 12%. 2

Your task is to:

  • Part I

    Select any two of these stocks, and calculate the most efficient portfolio (on a mean/variance basis) that you can create by using JUST THOSE TWO ASSETS .

a) Select two stocks – you may DELETE the rest. Delete the columns in the data file so you don’t get confused.

b) What is (i.e., calculate) the BETA of each stock?

c) Use the One Factor Index Model (CAPM) to estimate the expected return of each. That is, use CAPM’s Security Market Line equation to calculate the required rate of return, and assume that the Market is in equilibrium.

d) What is the weight of each (of your two) stock in the optimal portfolio?

e) What are the characteristics in expected return and in standard deviation of the optimal portfolio (of your two stocks)?

  • Part II

    You have a client who wishes to have a portfolio with a rate of return of (expected) 10%. What mix of two of your two stocks and of money market funds (paying 2%) or margin borrowing (cost = 7%) would you recommend?

Show more

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more