Question
1. Calculate the portfolio expected return, portfolio variance, and portfolio standard deviation for each of the values listed for the shares of a grain farm's
1. Calculate the portfolio expected return, portfolio variance, and portfolio standard deviation for each of the values listed for the shares of a grain farm's assets invested in corn and soybeans.
2. (15 points) Using the figures you calculated in your answer to question 1, draw a diagram showing the trade-off between risk and expected return for this farm. The diagram should have risk (as measured by the portfolio standard deviation) on the horizontal axis and expected return (as measured by the portfolio expected return) on the vertical axis.
Crop | Expected Return | Standard Deviation | Variance | Correlation Coefficient | Covariance |
Corn | 10 | 30 | 900 | 0.2 | 120 |
Soybeans | 6 | 20 | 400 | ||
Share of Assets to Corn | Share of Assets to Soybeans | Portfolio Expected Return | Portfolio Variance | Portfolio Standard Deviation | |
0.00 | 1.00 | ||||
0.05 | 0.95 | ||||
0.10 | 0.90 |
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