3. The following are the percentage returns of the assets in two portfolios, A and B....
There are only two risky assets A and B with expected returns r A = 30 % and r The covariance matrix of their returns is = 20 % [0.0576 0.0288] 0.0288 0.0256 (a) Solve for the minimum-variance portfolio of the two risky assets, as well as the expected rate of return and standard deviation of the portfolio. (9 marks) (b) Solve for an efficient portfolio with expected return 29.25 %. (8 marks) (c) Explain how the returns of the...
Question 1: Suppose there are two risky assets, A and B. You collect the following data on probabilities of different states happening and the returns of the two risky assets in different states: State Probability Return Asset A Return Asset B State 10.3 7% 14% State 20.4 6% -4% State 30.3 -8% 8% The risk-free rate of return is 2%. (a) Calculate expected returns, variances, standard deviations, covariance, and correlation of returns of the two risky assets. (b) There are...
An investor is considering two portfolios (Portfolio 1 and 2). Both possible portfolios consist of a 50% weight on Asset A: this asset has an expected return of 12% and a standard deviation of 18%. The other half of Portfolio 1 consists of Asset B: it has an expected return of 8% and a standard deviation of 10%. The other half of Portfolio 2 consists of Asset C: it has an expected return of 8% and a standard deviation of...
P.14 An investor holding a portfolio consisting of two stocks invests 25% of assets in Stock A and 75% into Stock B. The return RA from Stock A has a mean of 4% and a standard deviation of A = 8%. Stock B has an expected return E(RB) = 8% with a standard deviation of ob = 12%. The portfolio return is P = 0.25RA +0.75RB. (a) Compute the expected return on the portfolio. (b) Compute the standard deviation of...
2. Portfolio Choice Suppose we have assets A and B with the following distribution of returns: Probability Return for A .01 Return for B -.14 .00 .03 TO .05 .07 14 .30 .09 .50 a. Compute the expected returns for assets A and B, rA and rg. b. Compute the variances of A and B, oả and oß. c. Compute the covariance of A and B, CAR- d. Use the formulas for portfolio returns and risk to write the expected...
You have been asked for your advice in selecting a portfolio of assets and have been supplied with the following data: Projected Return Year Asset A Asset B Asset C 2018 14% 14% 10% 2019 16% 12% 12% 2020 18% 10% 14% You have been told that you can create two portfolios-- one consisting of assets A and B and the other consisting of assets A and C-- by investing equal proportions (50 %) in each of the two component...
Suppose you have two portfolios of two assets each. Portfolio A has a standard deviation of 0.35 and Portfolio B has a standard deviation of 0.15. Which portfolio most likely has a bigger difference between the geometric average return and the expected return (arithmetic average)?
e. What is the standard deviation of expected returns, so, for each portfolio? Portfolio AB: % (Round to two decimal places.) You have been asked for your advice in selecting a portfolio of assets and have been supplied with the following data: You have been told that you can create two portfolios —one consisting of assets A and B and the other consisting assets A and C-by investing equal proportions (50%) in each of the two component assets. a. What...
You have been asked for your advice in selecting a portfolio of assets and have been given the following data: Expected return Year Asset A Assest B Assest C 2019 12% 16% 12% 2020 14% 14% 14% 2021 16% 12% 16% You have been told that you can create two portfolios—one consisting of assets A and B and the other consisting of assets A and C—by investing equal proportions (50%) in each of the two component assets. a. What is...
You have been asked for your advice in selecting a portfolio of assets and have been supplied with the following data: You have been told that you can create two portfolios-one consisting of assets A and B and the other consisting of assets A and C-by investing equal proportions (50%) in each of the two component assets. a. What is the average expected return, r, for each asset over the 3-year period? b. What is the standard deviation, s, for...