2023 Based on current dividend yields and expected capital gains the expected rates of return on portfolios A and B | Assignments Online
2023 Based on current dividend yields and expected capital gains the expected rates of return on portfolios A and B | Assignments Online
Assignments Online 2023 Business & Finance
Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 9.5% and 12.5% respectively. The beta of A is .8 while that of B is 1.7. The T-bill rate is currently 5%, while the expected rate of return of the S&P 500 index is 10%. The standard deviation of portfolio A is 15% annually, while that of B is 36%, and that of the index is 25%.
a. If you currently hold a market index portfolio, what would be the alpha for Portfolios A and B? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 1 decimal place.)
Portfolio A __________________
Portfolio B __________________
b-1. If instead you could invest only in bills and one of these portfolios, calculate the measure for Portfolios A and B. (Round your answer to 2 decimal places.)
Portfolio A __________________
Portfolio B __________________
b-2. Which portfolio would you choose?
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