{"id":118147,"date":"2018-02-20T23:50:30","date_gmt":"2018-02-20T23:50:30","guid":{"rendered":"https:\/\/writemyessayfree.com\/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"},"modified":"2017-08-12T06:54:57","modified_gmt":"2017-08-12T06:54:57","slug":"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","status":"publish","type":"post","link":"https:\/\/www.benedictsol.com\/blogs\/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\/","title":{"rendered":"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%."},"content":{"rendered":"<p>Your task is to:<\/p>\n<ul>\n<li>\n<p>Part I<\/p>\n<p><i><b>Select any two of these stocks<\/b><\/i>, and calculate the most efficient portfolio (on a mean\/variance basis) that you can create by using&nbsp;<b>JUST THOSE TWO ASSETS<\/b>&nbsp;.<\/li>\n<\/ul>\n<p>a) Select two stocks &#8211; you may&nbsp;<b>DELETE<\/b>&nbsp;the rest. Delete the columns in the data file so you don&#8217;t get confused.<\/p>\n<p>b) What&nbsp;is (<i>i.e.,&nbsp;<\/i>calculate) the&nbsp;<i><b>BETA of each stock<\/b><\/i>?<\/p>\n<p>c) Use the One Factor Index Model (CAPM) to estimate the expected return of each. That is, use CAPM&#8217;s&nbsp;Security Market Line equation to&nbsp;<i><b>calculate the required rate of return<\/b><\/i>, and assume that the Market is in equilibrium.<\/p>\n<p>d) What is&nbsp;<i><b>the weight of each&nbsp;<\/b><\/i>(of your two)<i><b>&nbsp;stock<\/b><\/i>&nbsp;in the&nbsp;<i><b>optimal<\/b><\/i>&nbsp;portfolio?<\/p>\n<p>e) What are the characteristics in&nbsp;<i><b>expected return<\/b><\/i>&nbsp;and in&nbsp;<i><b>standard deviation<\/b><\/i>&nbsp;of&nbsp;<i><b>the optimal portfolio<\/b>&nbsp;<\/i>(of your two stocks)?<\/p>\n<ul>\n<li>\n<p>Part II<\/p>\n<p>You have a client who wishes to have a portfolio with a rate of return of (expected) 10%. What mix of two&nbsp;<i><b>of your two stocks and of money market funds<\/b><\/i>&nbsp;(paying 2%) or margin borrowing (cost = 7%) would you recommend?<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>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&nbsp;JUST THOSE TWO ASSETS&nbsp;. a) Select two stocks &#8211; you may&nbsp;DELETE&nbsp;the rest. Delete <a href=\"https:\/\/www.benedictsol.com\/blogs\/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\/\" class=\"read-more\">Read More &#8230;<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-118147","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/118147","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=118147"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/118147\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=118147"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=118147"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=118147"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}