Question

urgent

Given the following correlation matrix -vereinvestor would least prefer which of the town 2-stockport Select A Wand wand ocx and Y. 15:54 Paul Lynch manages a risky portfolio with an expected rate of return of 15% and a standard deviation of 20%. The T-bill rate is 2%. Suppose his client decides to invest in his risky portfolio a proportion (y) of his total investment budget so that his overall portfolio will have an expected rate of return of 12%. The proportion (y) is closest to: Select one: A. 92.31%. OB. 61.54%. O C. 76.92%. 15:54 A portfolio manager creates the following portfolio: Security Expected Annual Return 16% Expected Standard Deviation 20%

urgent,thanks

Answer 1

The following question should be solved with the help of options and the values have been taken from the table:

1. Option A : W and Y = +0.7

2. Option B : W and Z = +0.2

3. Option C : X and Y = -0.1.

Hence, a risk averse investor keeping all things equal would likely avoid Option C because a negative covariance means that the stocks would move in opposite directions and being the risk averse investor he is, he is likely to avoid Option C.