Greta has risk aversion of A=3 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S\&P 500 and a hedge fund, as well as a number of one-year strategies. (All rates are annual and continuously compounded.) The S&P 500 risk premium is estimated at 8% per year, with a standard deviation of 22%. The hedge fund risk premium is estimated at 10% with a standard deviation of 37%. The returns on both of these portfolios in any particular year are uncorrelated with its own returns in other years. They are also uncorrelated with the returns of the other portfolio in other years. The hedge fund claims the correlation coefficient between the annual return on the S&P 500 and the hedge fund return in the same year is zero, but Greta is not fully convinced by this claim. a-1. Assuming the correlation between the annual returns on the two portfolios is 0.3, what would be the optimal asset allocation? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.) S&P = __________
Hedge = _________
a-2. What is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter your answers as a decimal rounded to 4 places.)
Expected Risk Premium = __________
Answers
The optimal weight for the S&P 500 portfolio is 0.3364 or approximately 0.3364.
To find the optimal asset allocation, we need to calculate the expected return and standard deviation for both portfolios and then use Greta's risk aversion parameter to determine the weights.
Let w be the weight of the S&P 500 portfolio, so the weight of the hedge fund is (1-w).
The expected return on the S&P 500 portfolio is:
E(Rsp) = 0.08
The expected return on the hedge fund is:
E(Rhf) = 0.10
The standard deviation of the S&P 500 portfolio is:
σsp = 0.22
The standard deviation of the hedge fund is:
σhf = 0.37
The correlation coefficient between the annual returns on the two portfolios is given as ρ = 0.3.
So, the variance of a portfolio with weight w invested in the S&P 500 and (1-w) invested in the hedge fund is:
σp^2 = w^2σsp^2 + (1-w)^2σhf^2 + 2w(1-w)ρσspσhf
Substituting the values, we get:
σp^2 = w^2(0.22)^2 + (1-w)^2(0.37)^2 + 2w(1-w)(0.3)(0.22)(0.37)
Next, we need to calculate the expected return on the portfolio, which is simply the weighted average of the expected returns of the two portfolios:
E(Rp) = wE(Rsp) + (1-w)E(Rhf)
Now, we can calculate the utility of the portfolio using the formula:
U(Rp) = E(Rp) - 0.5Aσp^2
where A is Greta's risk aversion parameter.
Substituting the values, we get:
U(Rp) = w(0.08) + (1-w)(0.10) - 0.5(3)[w^2(0.22)^2 + (1-w)^2(0.37)^2 + 2w(1-w)(0.3)(0.22)(0.37)]
To find the optimal weight for the S&P 500 portfolio, we take the derivative of U(Rp) with respect to w, set it equal to zero, and solve for w:
dU/dw = 0.08 - 0.10 + 3w(0.22)^2 - 3(1-w)(0.37)^2 - 3(0.3)(0.22)(0.37) = 0
Solving for w, we get:
w = 0.3364
Therefore, the optimal weight for the S&P 500 portfolio is 0.3364 or approximately 0.3364.
Rounding intermediate calculations to four decimal places, we get:
S&P = 0.3364
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Related Questions
PLEASE HELP ME
Task 1: Careers and Educational
Requirements
Task points: [20]
conducting online research and choosing
a career related to personal finance-
[10]
identifying the educational qualifications
required to pursue the chosen career-
[10]
Task 2: Certification Requirements
• identifying the certifications required to
pursue the chosen career
Task points: [40]
[20]
[20]
e
Task points: [40]
• developing strategies to prepare for
getting these certifications
Task 3: Information Technology and
Interpersonal Skills
identifying information technology skills
required for the chosen career
[20]
identifying interpersonal skills required for
the chosen career
[20]
e
.
Answers
Answer:
For which career would these qualifications be most applicable?
ability to work alone and stay focused on a task
accuracy and precision in recording information
computer and technology skills
typically have significant post-secondary education
patience and persistence for repetitive tasks
Psychiatry
Nursing
Research
Dentistry
Explanation:
Which is the most important decision factor in transportation?
A.capacity
B. Cost
C.capability
D.reliability
Answers
If a company strictly complies with existing laws, the firm will group of answer choices fulfill some business ethics obligations. fulfill no business ethics obligations. fulfill all business ethics obligations. not need to fulfill any business ethics obligations.
Answers
If a company strictly complies with existing laws, the firm will fulfill all business ethics obligations.
What is ethical obligation?It should be noted that ethical obligation simply means re things that are expected by a company to do regarding ethics in the organization.
In this case, when a company strictly complies with existing laws, the firm will fulfill all business ethics obligations.
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Choosing which types of assets you will invest in is known as
O A. a long-term strategy
O B. diversification
O C. cash investment
O D. asset allocation
SUBMIT
Answers
Answer:
Asset allocation
Explanation:
Which term describes an investment approach intended to minimize risk and maximize returns?
Advantage
Diversification
Installment
Liquidity
Answers
Diversification is the term that describes an approach intended to minimize risk and maximize returns
What is Diversification?
Portfolio diversification is the process of allocating your money in a variety of securities and asset classes in order to reduce the portfolio's overall risk.
The main goal of portfolio diversity is to reduce investment risk, particularly unsystematic risk.
How to Diversify your Investments?
Investigate more investing optionsThink about bond or index funds.Maintain Your PortfolioRecognize When to ExitPay attention to commissionsDisadvantages of Diversification
Complicated tax lawsInvestments may be challenging due to the risk of investing in Unproven assets.Complications in handling too many InvestmentsTo know more about Diversification refer
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A client has asked Miles to design a light summery bedroom. She wants him to use texture to help show the season. To create the feel the client is looking for, which design feature will Miles MOST likely include?
Question 1 options:
1. a pale sand-colored linen bedspread
2. burgundy velvet drapes
3. thick, sheep skin rugs
4. a woven wool afghan blanket
Answers
Answer:
Explanation:
Number 2
A ceiling design that has a rectangular center that is either popped out or inverted to add an effect.
Answers
Answer:
tray ceilings
Tray Ceiling - Usually seen in dining rooms and kitchens, tray ceilings are built upwards in a cut out resembling a tray. It has a rectangular center that is either popped out or inverted to add an effect
Explanation:
Hope it helps
Which of these is NOTa concern for consumers in times of inflation? a.They cannot anticipate the cost of goods and services. b.They lose money on their investments and savings. c.They are at a disadvantage when paying back borrowed money. d.They struggle when they are on a fixed income.
Answers
Answer:
c.They are at a disadvantage when paying back borrowed money.
Explanation:
In any economics of a country, inflation may be defined as the fall of the value of the money or currency of a country over a period of time. In inflation, the general price level increase and the value of money decreases.
Due to inflation, with each currency unit, less of goods or services can be bought. In inflation, the consumers are not concern about the disadvantage when they pay back the money that they borrowed because the value of the money decreases. Money decreases its value but the demand of goods and services increases in the economy.
Nick is willing to invest $20,000 for five years, and is an economically rational investor. He has identified three investment alternatives (A, B, and C) that vary in their method of calculating interest and in the annual interest rate offered.
Since he can only make one investment during the five-year investment period, complete the following table and indicate whether Nick should invest in each of the investments.
Note: When calculating each investment’s future value, assume that all interest is compounded annually. The final value should be rounded to the nearest whole dollar.
Investment
Interest rate and Method
Expected future value
Make this investment?
A 10% simple interest B 6% compound interest C 7% compound interest
Answers
To determine whether Nick should invest in each of the investment alternatives (A, B, and C), we need to calculate their expected future values and evaluate their potential returns.
For Investment A, which offers a 10% simple interest rate, the future value can be calculated using the formula: Future Value = Principal + (Principal * Interest Rate * Time). Plugging in the values, we get:
Future Value of A = $20,000 + ($20,000 * 0.10 * 5) = $30,000. Investment refers to the act of allocating money, resources, or time into an asset, project, or venture with the expectation of generating future returns or benefits. The primary goal of investing is to grow wealth or achieve specific financial objectives over an extended period.
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Ian invests $13,670 in a savings account at his local bank which gives 1. 9% simple annual interest. He also invests $6,040 in an online savings account which gives 4. 5% simple annual interest. After nine years, which one will have earned more interest, and how much more interest will it have earned, to the nearest dollar?.
Answers
The online account will have earned $109 more interest because it annual simple interest in greater tham that of local bank account.
Simple interest :
Interest=Principal× Interest rate ×Time
To calculate the interest earned of local account
Interest=$13,670×0.019×9
Interest=$2,337.57
Now, to calculate the interest earned of online account
Interest=$6,040×0.045×9
Interest=$2,446.2
So,the difference in interest earned
Difference=$2,446.2−$2,337.57
Difference=$109
So, online Account will gain more interest after 9 years The online account will earn $109 more interest.
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What is one benefit US workers who have a college degree rather than a high school diploma?
Answers
Answer:
Those with a college degree earn nearly twice as much as those without college.
Explanation:
A college degree increases the chances of securing a higher paying job than a high school diploma. Most employers insist on college degrees for managerial or executive positions. These are the positions with good pay packages. Currently, college graduates earn nearly twice their high school diploma holders.
Answer:
D.
Explanation:
the person above me is correct
consider the market for strawberries. if a scientific article is published (and widely read by consumers) stating that eating strawberries stops cancer and is fantastic for overall health, what will happen to demand and supply? how will equilibrium price and equilibrium quantity be impacted? explain.
Answers
The publication of a scientific article claiming that eating strawberries can help prevent cancer and improve overall health would likely result in an increase in demand for strawberries in the market. This increase in demand would cause the equilibrium price of strawberries to increase, as buyers are willing to pay a higher price for the product. Furthermore, the equilibrium quantity of strawberries would also increase, as the higher price incentivizes producers to supply more strawberries to meet the increased demand.
Specifically, the increase in demand causes a shift in the demand curve to the right, which pushes the equilibrium price up and the equilibrium quantity up. The higher equilibrium price compensates producers for the extra effort they need to make in order to produce more strawberries, and the higher equilibrium quantity reflects the greater demand for the product.
It is important to note that the effects of the scientific article on the market for strawberries would likely be temporary. If the article proves to be inaccurate, or if the perceived benefit of eating strawberries decreases, then the demand for strawberries would eventually decrease, leading to a decrease in both the equilibrium price and the equilibrium quantity.
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Someone Help This Is Due today !!!!
Match the Professionalism term with its meaning
1.
Accountability
2.
Integrity
3.
Punctuality
4.
Productivity
5.
Initiative
a.
doing your job as efficiently and effectively as possible
b.
doing the right thing, even when no one is watching
c.
being responsible for your actions and words
d.
being on time
e.
to take charge or do things without being told
Answers
Answer:
Number 1
Explanation:
Number 1 is correct
Which opening would you use to the employees of a hospital about the new, extensive security access system?
Group of answer choices
We were lucky to hire one of the best local companies to increase our building's safety.
It's not that bad to have a little tighter security. Let me explain the benefits.
"Approximately 74,000 employees, suppliers, and contractors were affected by a data breach in 2014 because of stolen laptops with unencrypted personal data" says SANS Research.
Let me walk you through the new security badging system.
Answers
The most appropriate opening to use to the employees of a hospital about the new, extensive security access system would be: "Let me walk you through the new security badging system." This opening clearly and directly introduces the topic and shows that the speaker is ready to provide a step-by-step explanation of the new system.
The first opening, "We were lucky to hire one of the best local companies to increase our building's safety," does not directly address the new security access system and may not be relevant to the employees. The second opening, "It's not that bad to have a little tighter security. Let me explain the benefits," could be perceived as condescending and may not be the best way to introduce the topic.
The third opening, ""Approximately 74,000 employees, suppliers, and contractors were affected by a data breach in 2014 because of stolen laptops with unencrypted personal data" says SANS Research," may be factually accurate but it does not directly address the new security access system and may be too detailed for an opening statement.
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Disadvantages of choosing a job that is extremely popular or in demand
Answers
The disadvantage of choosing a job that is very popular or a job that is in high demand is that after a while such a job may become saturated or it would become monotonous.
What is a high demand job?This is the term that is used to refer to a job that the people that wpould employ labor are constantly in need of. Such a job is one that would require the people that have the qualification to opt in and get the places and the roles that they are to fill.
The issues that may arise from such a job that is in high demand is that after a period, such a job may have a lot of persons that would want to fulfil the role.
The number of qualified persons may become more than the job that is available for the people to do in the long run.
Hence this is a disadvantage. Therefore I would conclude by saying that the disadvantage of choosing a highly popular job is that the number of persons that are willing to fulfil the role may exceed the job overtime.
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there are these Karens at my house putting their trash in front of MY HOUSE and what can i do?
Answers
Answer:
call the cops
Explanation:
First have a conversation with them and if they do not understand simply be a Karen yourself and call the cops. I am pretty sure they will know what to do because that is YOUR property (or at least your own space that you pay for).
How does business generate income?
Answers
Hai!
This depends on the Type of Business.
If it is a Selling Business, they sell stuff to Earn Profit.
If its a Free Online Website/Game. They earn money by either in game purchases or Web Site purchases.
1 point
Wal-Mart relies on the thousands of miles or roads and their massive
trucks in order to ship their goods all over the country. Which factor of
production are roads and trucks considered?
Capital
Human / Labor
Natural / Land
Entrepreneur
Answers
Have a great day
Why should businesses be socially responsible? Give any two reasons.
Answers
Answer:
Embracing CSR increases customer retention and loyalty, increases employee engagement, improves brand imaging, attracts investment opportunities and top talent, and makes a difference for bottom-line financials.
Explanation:
Yeah.
What is profit in an economic system?
A. Profit is the investment a producer makes in the economy to achieve financial gain.
B. Profit is the net change in the value of the economy due to an exchange.
C. Profit is the financial gain resulting from an exchange.
D. Profit is the investment a consumer makes in the economy to achieve financial gain.
Answers
Answer:
I think D is correct answer
The profit in the economic system is the investment made by the consumer for accomplishing the financial gain.
The information related to the profit is as follows:
It is the surplus that comes after deducting the cost from the revenue made. It is the investment that should be made by the consumer for attaining financial gain.Therefore all the other options are incorrect.
Thus we can conclude that profit in the economic system is the investment made by the consumer for accomplishing the financial gain.
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break-even sales and sales to realize income from operations for the current year ended october 31, yentling company expects fixed costs of $14,000,000, a unit variable cost of $200, and a unit selling price of $300. a. compute the anticipated break-even sales (units). fill in the blank 1 units b. compute the sales (units) required to realize income from operations of $1,400,000. fill in the blank 2 units
Answers
The anticipated break-even sales (units) is 140,000 units. The sales (units) required to realize income from operations of $1,400,000. Fill in the blank 2 units is 154,000 units.
a. Compute the anticipated break-even sales (units).
Fill in the blank 1 units.
The expected break-even sales in units can be calculated as follows:
Fixed costs = $14,000,000
Unit variable cost = $200
Unit selling price = $300
Contribution margin = Unit selling price - Unit variable cost
= $300 - $200 = $100
The break-even point in units = Fixed costs / Contribution margin
= $14,000,000 / $100= 140,000 units
Therefore, the anticipated break-even sales (units) is 140,000 units
b. Compute the sales (units) required to realize income from operations of $1,400,000.
Fill in the blank 2 units.
The equation for computing the sales (units) required to realize income from operations is:
Sales (units) = (Fixed costs + Income from operations) / Contribution margin
Contribution margin = Unit selling price - Unit variable cost
= $300 - $200 = $100
Fixed costs = $14,000,000
Income from operations = $1,400,000Sales (units)
= ($14,000,000 + $1,400,000) / $100
= $15,400,000 / $100
= 154,000 units
Therefore, the sales (units) required to realize income from operations of $1,400,000. Fill in the blank 2 units is 154,000 units.
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who is ur top 3 favorite presidents
Answers
Answer:
George Washingto, Abraham Lincol, joe Biden
Explanation:
Which demographic groups does Women in Motion serve?(keep it clear and short)
Answers
The demographic group Women in Motion serve is Women who are all talented and Young giving in their best contribution to Cinema.
What is demographic?
Demographic is referred to defining a set of populations based on the characteristics like age, gender, social status, education, qualification, and so on.
"Women in Motion" has referred to a kind of award which was given to effective young female personalities who are raising the position of women in society and providing a contribution to their growth.
The event has emerged as a go-to platform for starting discussions and influencing perceptions around the representation of women in the arts and entertainment industries.
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which of the following does not contain an externality? group of answer choices i sell you an ice cream and you share it with your friend. i give you an ice cream and you share it with a friend. i sell you an ice cream and you drip it all over the person sitting next to you. i sell you an ice cream and it gives you a headache.
Answers
The option that does not contain an externality is: "i sell you an ice cream and it gives you a headache."
An externality is an unintended consequence of an economic activity that affects third parties who are not directly involved in the activity. in the given :
- "i sell you an ice cream and you share it with your friend": this situation does not involve an externality because the act of sharing the ice cream with a friend does not impose any unintended consequences on third parties.
- "i give you an ice cream and you share it with a friend": similar to the previous , this scenario does not involve an externality as the act of sharing the ice cream with a friend does not create unintended consequences for others.
- "i sell you an ice cream and you drip it all over the person sitting next to you": this situation does involve an externality because the action of dripping the ice cream on the person sitting next to you imposes an unintended consequence on that person.
- "i sell you an ice cream and it gives you a headache": this does not involve an externality as the headache experienced by the person who bought the ice cream is a direct consequence of consuming it, rather than an unintended consequence imposed on others.
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You have just been promoted at your job, and now you have a net income of $2,190. You would like to use this income to meet new financial goals. 1. Create a budget that will allow you to save at least $100 by the end of October. (10 points) Remember, your old budget reflected a net income of $1850.00 and included these expenses: • $600 for your rent • $475 for your car payment, car insurance, and gas • $230 for your utilities, phone, and Internet • $300 for your groceries • $50 for your entertainment • $20 for your renters insurance • $75 for discretionary spending • A final net total of $100 saved per month Your new budget needs to include these changes: • A new line to budget $50 per month toward a new computer • Other expenses may be modified as you choose. • A final net total of at least $300 saved per month
Answers
Answer: $300 saved per month
Explanation:
new budget $2,190.
rent $650car, insurance and gas $480utilities, phone and internet $250groceries $300entertainment $50rentals $30discretionary spending $80new line budget $50total $1890
final net total = \(2190 - 1890\\\)
= $300 saved per month
it say we need to save at least $300 per month, what this implies is that the minimum we can save is $300.
Answer:
300 per month saved
Explanation:
if the price of peanut butter decreases, what will likely happen to the demand for jelly? A.The demand for jelly will increase, and the demand curve will shift to the right.
B.The demand for jelly will decrease, and the demand curve will shift to the left.
C.The demand for jelly will increase, and the demand curve will shift vertically upward.
D.The demand for jelly will decrease, and the demand curve would shift vertically downward.
Answers
Option D is correct. Jelly demand will fall, and the demand curve will shift vertically downward. If the prices of two goods are complementary, lowering the price of one will reduce demand for the other.
Demand is generally thought to slope downward: as prices rise, consumers buy less. The intersection of the two curves is the market-clearing cost price during which supply and demand are equal. Prices can fluctuate for a wide range of causes. When prices fall, consumers postpone purchases if possible, awaiting lower costs down the road. For the economic system this implies less economic growth, less earnings generated by manufacturers, and less growth in the economy. A drop in demand indicates that consumers intend to buy less of the product at each price possible. One of the additional factors influencing demand is the price of goods produced. Capital equipment are divided into two categories: substitutes and complements.
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Consider your own career-related goals and dreams for the future—what are they? Briefly explain your career goals as they are today. Then, identify a specific professional organization that could benefit your pursuit of these goals. Evaluate how you might benefit from joining this organization.
Answers
Answer:
As an engineering student, my career goal is to work as a professional engineer in a reputed organization. I want to specialize in the field of renewable energy and work towards developing sustainable solutions for our planet's energy needs. My dream is to contribute towards the development of green technologies that can help reduce our carbon footprint and promote a cleaner environment.
One specific professional organization that could benefit my pursuit of these goals is the Institute of Electrical and Electronics Engineers (IEEE). This organization is dedicated to advancing technology for the benefit of humanity and has a specific focus on renewable energy and sustainable development.
By joining IEEE, I could benefit in several ways. Firstly, I would have access to a network of professionals and experts in the field of renewable energy, which could provide me with valuable guidance and mentorship. I would also have access to a range of educational resources, including conferences, seminars, and publications, which could help me stay up-to-date with the latest developments in the field.
In addition, being a member of IEEE would enhance my credibility as a professional engineer, and it could help me build a strong reputation in the industry. This could lead to potential career opportunities, and it could help me achieve my long-term career goals. Overall, joining IEEE would be a valuable investment in my future as an engineer and could help me make a positive impact on the world.
Explanation:
Consider our IS/LM/BOP analysis. Suppose also that we are in a fixed price, fixed exchange rate setup (with automatic money supply adjustment). If the capital account were highly interest sensitive (such that the BOP curve is flatter than the LM curve), an increase in the money supply would cause none of the other options. the interest rate, r, to rise, but national income, Y, to fall. r and Y to fall. no change in r and Y. r and Y to rise.
Answers
An increase in the money supply would cause the interest rate, r, to rise, but national income, Y, to fall if the capital account were highly interest sensitive (such that the BOP curve is flatter than the LM curve) when considering the IS/LM/BOP analysis in a fixed price, fixed exchange rate setup (with automatic money supply adjustment).
Therefore, the answer is: the interest rate, r, to rise, but national income, Y, to fall .Let's see the reason behind this :In the context of the IS/LM/BOP model, a fixed exchange rate regime necessitates that the central bank takes on the obligation of maintaining the exchange rate by intervening in the foreign exchange market. To keep the exchange rate steady, the central bank must make continuous adjustments to the supply of money in response to capital inflows or outflows. The LM curve shifts to the right when there is a monetary expansion, and the LM curve shifts to the left when there is a monetary contraction .The BOP curve shifts upward when there is an increase in the interest rate differential and downward when there is a decrease in the interest rate differential. The capital account is more interest-sensitive than the LM curve when the BOP curve is flatter than the LM curve .When the capital account is highly interest-sensitive and the BOP curve is flatter than the LM curve, an increase in the money supply will cause the interest rate to rise and national income to fall. Thus, we can conclude that an increase in the money supply would cause the interest rate, r, to rise, but national income, Y, to fall.
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This shop is a sole trader and needs to obtain finance in order for the business to continue trading. Explain
two sources of finance that could help this business further expand
Answers
Answer:
see below
Explanation:
1. Personal Savings
The sole trader can invest his savings into his business for expansion. A sole trader who is confident about his business's prospects will be prepared to invest additional savings into the business for growth. The use of savings relieves them from the strain of interest payments and enables them to retain full control over the business.
2. Sale of Assets
Should a sole trader require funds to expand their business, they opt to dispose of some of their assets. If the trader does not have savings or retained earnings and have a property registered in their name, they may decide to sell it to raise capital.
Weston sells his residence to Joanne on October 15, 2020. Indicate which of the following statements is correctly associate with Code Section 121 (exclusion of gain on sale of principal residence).
a. Selling expenses decrease the seller's amount realized and increase the buyer's adjusted basis.
b. Repair expenses of the seller decrease the seller's amount realized and have no effect on the buyer's adjusted basis.
c. Capital expenditures made by the seller prior to the sale increase the seller's adjusted basis and have no effect on the buyer's adjusted basis.
d. Only choices a. and c.
Answers
Capital expenditures made by the seller prior to the sale increase the seller's adjusted basis and have no effect on the buyer's adjusted basis.
Here correct answer is A) and C)
This is in accordance with Code Section 121 which allows the exclusion of gain on the sale of a principal residence. Under this section, the seller's adjusted basis is increased by capital expenditures made prior to the sale, and the buyer's adjusted basis is not affected.
On the other hand, selling expenses decrease the seller's amount realized and increase the buyer's adjusted basis, while repair expenses of the seller decrease the seller's amount realized and have no effect on the buyer's adjusted basis. Therefore, choices a. and c. are the correct statements in this case.
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