FIN 344 Efficient Frontier Assignment

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NMaN85

Business Finance

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Hi

the assignment is on excel you have the excel sheet I just need you to find the Wb and Ws for the maximum-Sharpe-ratio portfolio in the last row of your data. With the information are given In the second paper.

check the attachment please.

the picure is sample.

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FIN 344 Spring, 2019 Carter Efficient Frontier Assignment This assignment is to be done in Excel. Please submit it to the thread that I will set up. You are interested in forming a portfolio with Stock S and Bond B. Stock S has an expected return of 20.4% and a standard deviation of returns of 13.9%. Bond B has an expected return of 8.4% and a standard deviation of returns of 6.6%. The correlation coefficient of the returns of S and B is 0.25. The risk-free rate of return is 3%. Using increments of one percentage point, fill in the template posted and plot both efficient frontiers (with vs. without the risk-free asset.) When plotting the line for the frontier with the risk-free asset, use a range from 0 to 30 for the X values. Please put the Wb and Ws for the maximum-Sharpe-ratio portfolio in the last row of your data. Please do not forget the important reminders below. 1. The weight in the bond (Wb) for the minimum-variance portfolio needs to be inserted numerically within the Wb column. 2. The weight in the bond (Wb) for the maximum-Sharpe-Ratio portfolio does not need to be inserted numerically in the Wb column, but you can do so if you would like. E(Rs) E(Rb) SDstock SDbond CorrBS T-bill rate INSERT THE GIVEN VALUES HERE AS REGULAR NUMBERS, NOT DECIMALS. ws wb E(rp) PLEASE ADD ROWS AS NEEDED. (wssds)^2 (wbsdb)^2 2wssdswbsdbpbs Var(rp) wb for min. var. portfolio: numerator = denominator = Answer = Line goes through two points: (0,rf) and xy coordinates of optimal risky Now construct EF portfolio (i.e., when risk-free asset highest Sharpe exists. ratio). SD(rp) We know that (0,rf) = (0, Tbill rate). Now we need to find portfolio with highest Sharpe ratio. Sharpe Ratio wb for optimal Sharpe Ratio: Term 1 numerator: denominator: Answer: This is our slope. Find points on line. Max Sharpe Ratio THIS CELL ONLY. USE =MAX FUNCTION. x y=mx+b 0 1 2 3 4 5 6 7 8 9 10 Term 2 Term 3 Total - 6 51 11 ESO 10 11 110725511 11111 156561 254 101 121
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Explanation & Answer

Attached.

E(Rs)

E(Rb)
20.40

8.40

193.21
22.94

22.94
43.56

SDstock
SDbond
13.90

CorrBS
6.60
Weights

S
B

T-bill rate
0.25
ER
0.11 Variance
0.89 Std Deviation

3.00
9.69649
41.33166
6.42897

Misc Info
1
1

ws

17.40
5.40

wb
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
0.20
0.22
0.24
0.26
0.28
0.30
0.32
0.34
0.36
0.38
0.40
0.42
0.44
0.46
0.48
0.50
0.52

E(rp)
1.00
0.98
0.96
0.94
0.92
0.90
0.88
0.86
0.84
0.82
0.80
0.78
0.76
0.74
0.72
0.70
0.68
0.66
0.64
0.62
0.60
0.58
0.56
0.54
0.52
0.50
0.48

8.400
8.640
8.880
9.120
9.360
9.600
9.840
10.080
10.320
10.560
10.800
11.040
11.280
11.520
11.760
12.000
12.240
12.480
12.720
12.960
13.200
13.440
13.680
13.920
14.160
14.400
14.640

(wssds)^2
0.00000
0.07728
0.30914
0.69556
1.23654
1.93210
2.78222
3.78692
4.94618
6.26000
7.72840
9.35136
11.12890
13.06100
15.14766
17.38890
19.78470
22.33508
25.04002
27.89952
30.91360
34.08224
37.40546
40.88324
44.51558
48.30250
52.24398

(wbsdb)^2 2wssdswbsdbpbs
Var(rp)
43.560000
0.000000 43.56000
41.835024
0.899052 42.811...


Anonymous
Goes above and beyond expectations!

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