Question
Andrea Corbridge is considering forming a portfolio consisting of Kalama Corp. and Adelphia Technologies. The two corporations have a correlation of -0.1789, and their expected
Andrea Corbridge is considering forming a portfolio consisting of Kalama Corp. and Adelphia Technologies. The two corporations have a correlation of -0.1789, and their expected returns and standard deviations are as follows:
| Kalama Corp. | Adelphia Technologies |
Expected return (%) | 14.86 | 23.11 |
Standard Deviation (%) | 23.36 | 31.89 |
1. Andrea has $50,000 and wants to earn a 19% expected return on her investment. Describe the optimal manner in which to structure her portfolio-both in dollar amounts and in weights relative to her $50,000-based on the preceding information.
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