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4. The following are expected returns and risks of US and UK assets. US UK Expected return 10% 14% Risk 15% 20% (1) p =
4. The following are expected returns and risks of US and UK assets. US UK Expected return 10% 14% Risk 15% 20% (1) p = 1 (ii) p = -1 (iii) p = .35 (iv) p = ..55 a) Compute the expected return and risk of a portfolio made up of the following proportions of US and UK assets: US: 80%, 60%, 45%, 25%, 15% UK: 20%, 40%, 55%, 75%, 85% (try for 4 values of p; 5 combinations of US and UK) b) For the case of p = -1, compute the relevant weights for US and UK to construct a portfolio with zero risk and calculate the expected return on such a portfolio. [Ans: Wi = 57.14% or 4/7; W2 = 42.86% or 3/7]: [Rip = 11.71%] 4. The following are expected returns and risks of US and UK assets. US UK Expected return 10% 14% Risk 15% 20% (1) p = 1 (ii) p = -1 (iii) p = .35 (iv) p = ..55 a) Compute the expected return and risk of a portfolio made up of the following proportions of US and UK assets: US: 80%, 60%, 45%, 25%, 15% UK: 20%, 40%, 55%, 75%, 85% (try for 4 values of p; 5 combinations of US and UK) b) For the case of p = -1, compute the relevant weights for US and UK to construct a portfolio with zero risk and calculate the expected return on such a portfolio. [Ans: Wi = 57.14% or 4/7; W2 = 42.86% or 3/7]: [Rip = 11.71%]
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