Ashford 3: - Week 2 - AssignmentAshford 3: - Week 2 - AssignmentAshford 3: - Week 2 - Assignment

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. Calculate the frontier for all possible investment combinations of Kalama Corp. and Adelphia Technologies (from 0% to 100%, in 1% increments). Determine the optimal risky portfolio if the risk-free rate is 3%.

Ashford 3: - Week 2 - Assignment

2. 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

3.Andrea is also seriously considering buying some stock in Medford Barnett Corporation (MBC). The stock prices of MBC and the S&P for the past 25 months are tabulated below. Andrea estimates that MBC will earn a 14% return during the next year, and she expects the market to earn a 12% return during the same time period. In addition, she expects the relationship exhibited between the S&P and MBC to remain as it has in the past. Assuming that Andrea would be pulling MBC into a fully diversified portfolio, explain if buying the MBC shares a good decision.

Month	S&P	MBC
1	1198.41	58.04
2	1228.81	65.36
3	1220.33	48.48
4	1234.18	53.32
5	1191.33	57.59
6	1191.50	49.23
7	1156.85	55.57
8	1180.59	50.99
9	1203.60	64.10
10	1181.27	50.45
11	1211.92	50.65
12	1173.82	51.23
13	1130.20	46.68
14	1114.58	51.09
15	1104.24	50.75
16	1101.72	59.80
17	1140.84	52.78
18	1120.68	49.22
19	1107.30	53.47
20	1126.21	49.26
21	1144.94	48.55
22	1131.13	61.32
23	1111.92	48.06
24	1058.20	58.88
25	1050.71	46.19