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Rashid [163]
3 years ago
15

Treasury bills are paying a 4% rate of return. A risk-averse investor with a risk aversion of A = 3 should invest entirely in a

risky portfolio with a standard deviation of 24% only if the risky portfolio's expected return is at least ______.
Business
2 answers:
Tomtit [17]3 years ago
7 0

Answer:

Answer is 12.64%. Therefore,

Treasury bills are paying a 4% rate of return. A risk-averse investor with a risk aversion of A = 3 should invest entirely in a risky portfolio with a standard deviation of 24% only if the risky portfolio's expected return is at least 12.64%.

Refer below for the explanation.

Explanation:

E - 4%= 0.5(3)(24%)2

E=12.64%

AVprozaik [17]3 years ago
5 0

Answer:

21.28%

Explanation:

This can be calculated using the risk aversion formula as follows:

A = (R – r) ÷ SD^2 ……………………………… (1)

Where;

A = risk aversion rate = 3

R = Portfolio’s expected return = ?

r = Treasury bills rate of return = 4%, or 0.04

SD^2 = Square of portfolio’s standard deviation = (24%)^2, or 0.24^2 = 0.0576

Substituting the values into equation (1) and solve for R, we have:

3 = (R – 0.04) ÷ 0.056

R – 0.04 = 3 × 0.056

R = 0.1728 + 0.04 = 0.2128, or 21.28%.

Therefore, the risky portfolio's expected return is at least 21.28%.

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---------------------

Hope this helps, now you know the answer and how to do it. HAVE A BLESSED AND WONDERFUL DAY! As well as a great rest of Black History Month! :-)  

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3 years ago
The most competitively effective and very likely most profitable long-term approach to reducing or eliminating the impact of pay
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The following information is from the December 31, 2017 balance sheet of Jackson Corporation
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Explanation:

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number of shares issued =Preferred stock / par value preferred stock= =$260,000 / $100 = 2,600 shares

Paid in capital in excess of par = total issued price - preferred stock

total issued value =  paid in capital in excess of par preferred stock + preferred stock = 14,000 + 260,000=$274,000

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alexandr402 [8]

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