Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Riskfree lending and borrowing

2,593 views

Published on

  • Be the first to comment

  • Be the first to like this

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%

×