Given the following information estimate the monthly expected return of a portfolio of 40% AAA and...

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Given the following information estimate the monthly expected return of a portfolio of 40% AAA and 60% BBB. Assume you purcha

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Answer 1

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Η BBB Return 75 G Stock Price Month AAA AAA Return BBB 18-Jan 100 18-Feb 1201=(G4-G3/G3 18-Mar 140 16.67% 18-Apr 110 -21.43%

75 F Stock Price Month AAA AAA Return BBB BBB Return 18-Jan 100 18-Feb 120 20.00% 80 6.67% 18-Mar 16.67% 18.75% 18-Apr 110 -2

Hence, monthly expected return of the portfolio with 40% AAA and 60% BBB=40%*1.28%+5.45%*60%= 3.782%

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