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1、Chapter6CapitalAllocationtoRiskyAssets61Copyright?2014McGrawHillEducation.Allrightsreserved.NoreproductiondistributionwithoutthepriwrittenconsentofMcGrawHillEducation.CHAPTER6:CAPITALALLOCATIONTORISKYASSETSPROBLEMSETS1.(
2、e)Thefirsttwoanswerchoicesareincrectbecauseahighlyriskaverseinvestwouldavoidptfolioswithhigherriskpremiumshigherstarddeviations.InadditionhigherlowerSharperatiosarenotanindicationofaninveststolerancefrisk.TheSharperatioi
3、ssimplyatooltoabsolutelymeasurethereturnpremiumearnedperunitofrisk.2.(b)Ahigherbrowingrateisaconsequenceoftheriskofthebrowers’default.Inperfectmarketswithnoadditionalcostofdefaultthisincrementwouldequalthevalueofthebrowe
4、r’soptiontodefaulttheSharpemeasurewithappropriatetreatmentofthedefaultoptionwouldbethesame.HoweverinrealitytherearecoststodefaultsothatthispartoftheincrementlowerstheSharperatio.Alsonoticethatanswer(c)isnotcrectbecausedo
5、ublingtheexpectedreturnwithafixedriskfreeratewillmethandoubletheriskpremiumtheSharperatio.3.Assumingnochangeinrisktolerancethatisanunchangedriskaversioncoefficient(A)higherperceivedvolatilityincreasesthedenominatoftheequ
6、ationftheoptimalinvestmentintheriskyptfolio(Equation6.7).Theproptioninvestedintheriskyptfoliowilltherefedecrease.4.a.Theexpectedcashflowis:(0.5$70000)(0.5200000)=$135000.Withariskpremiumof8%overtheriskfreerateof6%therequ
7、iredrateofreturnis14%.Therefethepresentvalueoftheptfoliois:$1350001.14=$118421b.Iftheptfolioispurchasedf$118421providesanexpectedcashinflowof$135000thentheexpectedrateofreturn[E(r)]isasfollows:$118421[1E(r)]=$135000There
8、feE(r)=14%.Theptfoliopriceissettoequatetheexpectedrateofreturnwiththerequiredrateofreturn.c.IftheriskpremiumoverTbillsisnow12%thentherequiredreturnis:6%12%=18%Thepresentvalueoftheptfolioisnow:$1350001.18=$114407d.Fagiven
9、expectedcashflowptfoliosthatcommgreaterriskChapter6CapitalAllocationtoRiskyAssets63Copyright?2014McGrawHillEducation.Allrightsreserved.NoreproductiondistributionwithoutthepriwrittenconsentofMcGrawHillEducation.Theindiffe
10、rencecurveinProblem7differsfromthatinProblem6inslope.WhenAincreasesfrom3to4theincreasedriskaversionresultsinagreaterslopeftheindifferencecurvesincemeexpectedreturnisneededindertocompensatefadditionalσ.E(r)5U(Q6A=3)U(Q7A=
11、4)U(Q8A=0)U(Q9A0)8.Thecoefficientofriskaversionfariskneutralinvestiszero.Therefethecrespondingutilityisequaltotheptfolio’sexpectedreturn.Thecrespondingindifferencecurveintheexpectedreturnstarddeviationplaneisahizontallin
12、elabeledQ8inthegraphabove(seeProblem6).9.Ariskloverratherthanpenalizingptfolioutilitytoaccountfriskderivesgreaterutilityasvarianceincreases.Thisamountstoanegativecoefficientofriskaversion.Thecrespondingindifferencecurvei
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