Question
1-An investor puts 40% of their money in Stock 1 with a 10.25% expected return, 25% of their money in Stock 2 with a 11.05%
1-An investor puts 40% of their money in Stock 1 with a 10.25% expected return, 25% of their money in Stock 2 with a 11.05% expected return and the rest in Stock 3 with an expected return of 13.65%. What is the portfolio's expected return?
2-
An investor puts 75% of their money in Stock 1 and the rest in Stock 2. Stock 1 has a standard deviation of 48% and Stock 2 has a standard deviation of 36%. The covariance between the two stocks is 0.094478. What is the portfolio's standard deviation? |
3-
You have a risky portfolio with a beta of 2.1. You wish to reduce the portfolio beta to 0.3. In order to do this you will change your asset allocation and add risk free government bonds. What percentage of your investment should be in government bonds and what percentage should be in the risky portfolio to accomplish your goal? |
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
1 To calculate the portfolios expected return we need to multiply the expected return of each stock by the corresponding allocation and then sum them ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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