Securities Expected Return Standard Deviation
X                        20                 15
Rf                        8  ...
35

          30

          25

          20

          15

          10

           5

           0
               0     ...
Rf              8
E(Rm)          18

        Beta         E(Ri)
               0.5           13
               0.9        ...
E(Ri)




1.5   1.9           2
ER                                 Var
Rf                                8%               0%
X                            ...
sd          Cov       Correlation
        0         0      #DIV/0!
     0.05


Equity B Devg of Rf Devg of X Codeviation
 ...
Riskfree and Risky
14.00%




12.00%




10.00%




 8.00%


                                                             ...
Portfolio       Wt of Rf Wt of X    ER (P)    SD (P)
            1        100%        0%     8.00%     0.00%   0   0.00%
 ...
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Riskfree lending and borrowing

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Transcript of "Riskfree lending and borrowing"

  1. 1. Securities Expected Return Standard Deviation X 20 15 Rf 8 0 Riskfree Lending Portfolios X Rf Expected Return Standard Deviation A 0 1 8.00 0.00 B 0.25 0.75 11.00 3.75 C 0.5 0.5 14.00 7.50 D 0.75 0.25 17.00 11.25 E 1 0 20.00 15.00 F 1.25 -0.25 23.00 18.75 G 1.50 -0.50 26.00 22.50 35 H 1.75 -0.75 29.00 26.25 30 I 2.00 -1.00 32.00 30.00 25 20 15 10 5 Security ER 0 X 20.00 0 5 Y 25.00 Rf 8.00 30 25 Variance-Covariance Matrix 20 146 187 15 187 854 10 5 0 10 15 20 25 Proportion X Y Rf ER(P) Er of Risky SD 0.8 0.2 0 21 21 13.69 0.25 0.25 0.5 15.25 11.25 9.27 0.35 0.35 0.3 18.15 15.75 12.97 0.1 0.1 0.8 10.9 4.5 3.71
  2. 2. 35 30 25 20 15 10 5 0 0 5 10 15 20 25 30 35 Column K 10 15 20 25 30 35 1 0 20 12.08 0.75 0.25 21.25 14.34 0.5 0.5 22.5 18.53 0.25 0.75 23.75 23.66 0 1 25 29.22
  3. 3. Rf 8 E(Rm) 18 Beta E(Ri) 0.5 13 0.9 17 1.1 19 1.4 22 1.5 23 1.9 27 2 28 E(Ri) 30 25 20 15 E(R 10 5 0 0.5 0.9 1.1 1.4 1.5 1.9
  4. 4. E(Ri) 1.5 1.9 2
  5. 5. ER Var Rf 8% 0% X 12% 0% Probability of Occurrence T-Bills 0.05 0.08 0.2 0.08 0.5 0.08 0.2 0.08 0.05 0.08
  6. 6. sd Cov Correlation 0 0 #DIV/0! 0.05 Equity B Devg of Rf Devg of X Codeviation -0.02 0 0 0 0.09 0 0 0 0.12 0 0 0 0.15 0 0 0 0.26 0 0 0
  7. 7. Riskfree and Risky 14.00% 12.00% 10.00% 8.00% Column E 6.00% 4.00% 2.00% 0.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%
  8. 8. Portfolio Wt of Rf Wt of X ER (P) SD (P) 1 100% 0% 8.00% 0.00% 0 0.00% 2 80% 20% 8.80% 0.96% 0 0.96% 3 60% 40% 9.60% 1.93% 0 1.93% 4 40% 60% 10.40% 2.89% 0 2.89% 5 20% 80% 11.20% 3.85% 0 3.85% 6 0% 100% 12.00% 4.82% 0 4.82%

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