You would like to invest in a portfolio of the following two
securities: Security A whose expected return is 25% per year and
standard deviation is 26% per year and Security B whose expected
return is 10% per year and standard deviation is 15% per
year.
What is the expected return on a portfolio that invested 40% in
Security A and 60% in Security B? (5 pts)
If the correlation between the return on Security A and Security
B is negative 0.50, what would be the standard deviation for the
portfolio invested 40% in Security A and 60% in Security B? (5
pts)
Given your answer in part b would you reduce your risk by
investing in this portfolio rather than investing all your money in
security B? Answer Yes or No and explain. (4 pts)
You would like to invest in a portfolio of the following two securities: Security A whose expected return is 25% per yea
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