Question
1.Suppose there is a two-asset portfolio, consisting of Asset A and Asset B. The returns of both assets follow normal distribution. Asset A has an
1.Suppose there is a two-asset portfolio, consisting of Asset A and Asset B. The returns of both assets follow normal distribution. Asset A has an expected return of 12.5%, Asset B has an expected return of 2.5%. The standard deviation of the Asset A s return is 4.5%, and the standard deviation of the Asset B s return is 6.5%. The correlation coefficient ( ) of the two assets is 0.15. The market value of Asset A is 35% of the total portfolio. What is the expected return of this portfolio?
| A. | 1.25% |
| B. | 2.50% |
| C. | 2.75% |
| D. | 3.15% |
| E. | None of the above |
2.
What is the standard deviation of the return of this portfolio?
A. | 0.035 | |
B. | 0.047 | |
C. | 0.265 | |
D. | 0.318 | |
E. | None of the above |
3.
What is the VaR of this portfolio at 1% left tail?
A. | -5.6% | |
B. | -6.2% | |
C. | -7.3% | |
D. | -8.2% | |
E. | None of the above |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started