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1 . Suppose there are two assets, Microsoft and Pepsi, with the following properties. Microsoft has an expected return of 2 5 % and a
Suppose there are two assets, Microsoft and Pepsi, with the following
properties. Microsoft has an expected return of and a standard deviation of
while Pepsi has an expected return of and a standard deviation of
The correlation is
a Calculate the portfolio expected return and risk standard deviation for the
following portfolios:
a: invested in Microsoft and in Pepsi
b: invested in Microsoft and in Pepsi
c
d
e
f
b Draw a graph with the different portfolios, ie their risk and return
combinations expected return on the yaxis and standard deviation on the
xaxis Which of the above portfolios are on the efficient frontier?
Suppose there are two stocks, BMW and Toyota. BMW has a beta of and a
standard deviation of its returns of while Toyota has a beta of and a
standard deviation of its returns of The excess return of the market portfolio relative to the riskfree asset is and the riskfree rate is
a What is the expected return for the stocks?
b What are the expected return and standard deviation for portfolios that
are equally invested in the stocks and the riskfree asset?
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