Question

2 (APR and EAR): A T-bill pays $10,000 at maturity in 1 month. Its current price is $9900. What are the HPR? APR? and EAR?

6. You proposed a portfolio for your client with 70% in Apple Inc. stock and 30% in Vanguard Global Equity Fund (mutual fund, ticker:VHGEX). Five weeks have passed, and you have the following statistics for the two assets and want to deliver a performance report to the client regarding portfolio performance on a weekly basis. 1 FIN327 Apple Inc. 0.12% 3% 0.8 0.6 Vanguard Global Equity Fund Weekly return Standard deviation Beta Correlation coefficients 0.32% 1.5% 0.7 a. What's the weekly return for the portfolio? b. What's the portfolio standard deviation and beta?

Answer 1

6)Let us assume Apple Inc as A and vangaurd as B
a)Expected return of portfolio=(wt of A* return on A)+(wt on B*return on B)
=(70%*.12%)+(30%*.32%)
=0.18%
std of portfolio=((wt of A^2*std of A^2)+(wt of B^2*std of B^2)+(2*wt of a*wt of B*corr(A,B)* std A*std B))^0.5
=((70%^2*3%^2)+(30%^2*1.5%^2)+(2*70%*30%*0.6*3%*1.5%))^0.5
=2.40%

Beta of portfolio=(wt of A*beta of A)+(wt B* beta B)
=(70%*0.8)+(30%*0.7)
=0.77