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Assignment 1. Plot in Excel the risky asset opportunity set…

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Assignment 1. Plot in...
Assignment
1. Plot in Excel the risky asset opportunity set for Portfolios A & B. Hint: create the
following table in excel assuming weights of portfolio A & B in 10 percentage
point increments. Then calculate expected return and standard deviation for
each allocation to A & B.
Weight Port A
Weight Port B
Return
Standard
Deviation
Sharpe Ratio
0%
100%
10
90
20
80
30
70
40
60
50
50
60
40
70
30
80
20
90
10
100
0
Determine the optimal allocation of A & B and draw in the Capital Allocation Line
(CAL). You can arrive at an approximate optimal allocation using a table similar to
the one shown above OR you can obtain a more precise optimal allocation using the
formula shown in Chapter 7 (equation 7.13). When drawing the CAL on the efficient
frontier graph plotted in Excel, you can manually draw a line starting at the risk free
rate to the tangent point.
2. Find the optimal complete portfolio based on your client’s indifference curve.
Hint: Plot an indifference curve on the same graph you just created using the
utility function formula from Chapter 6. Use the range of expected return and
standard deviations shown in the table below. Assume U = 9% and a risk
aversion coefficient (A) of 10 to complete the table below.
Expected Return
Standard Deviation
5%
7.5
10
12.5
15
17.5
20
22.5
25
3. Use the capital asset pricing model (CAPM) to determine the beta and alpha of
Portfolio A & Portfolio B. Show the CAPM relationship graphically for BOTH
Portfolio A and Portfolio B (separate graphs). The market portfolio is represented
by the S&P 500 and the risk free rate is represented by 90 day Treasury Bill.
Determine the beta for portfolio A & B using: i) the slope function in Excel; and ii)
the formula for beta – the co-variance between the asset and the market dividedby the variance of the market. This is explained in the Modules 6& 7 notes and
pages 296 & 297 in the text. Recall the covariance between two assets is the
volatility of asset 1 times the volatility of asset 2 times the correlation between
them.
Calculate the expected alpha for each portfolio A & B using the intercept function
in Excel and the index model of CAPM formula (equation 9.9 on page 302 – note
that the terms are in excess return form). Ignore the error term and you have all
the information to solve for alpha based on the monthly returns. Compare the
betas and y-intercepts using the two different methods.
Submitted: 4 months ago.Category: Business and Finance Homework
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Answered in 2 hours by:
12/8/2017
Business Tutor: F. Naz, Bachelor's Degree replied 4 months ago
F. Naz
F. Naz, Bachelor's Degree
Category: Business and Finance Homework
Satisfied Customers: 5,450
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Please mention your deadline and also clarify that you only need the excel sheet or there is some descriptive part of the assignment, thanks.

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Customer reply replied 4 months ago
I attached both the study and the spreadsheet. I need this by 6pm today if that is possible.
Business Tutor: F. Naz, Bachelor's Degree replied 4 months ago

How many hours are remaining from now and will you be able to cite my work in your assignment, thanks.

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Customer reply replied 4 months ago
I don't think I will be able to cite it, but I really just need to understand it and how it is calculated. That 5 hours from now, but even 7 hours will work. I just need time to view it and understand it. Its for a group project and this is more for me to understand as my team has already done it. But I would need it no later than 8pm EST.
Business Tutor: F. Naz, Bachelor's Degree replied 4 months ago

Sorry opting out so other can do this as the time period is too short.

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Customer reply replied 4 months ago
I just need question 1-3 answered on the word file. The excel is to help with the math.
Customer reply replied 4 months ago
how you calculate yhem
Customer reply replied 4 months ago
Did you repost the question for someone else
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