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Assume monthly risk-free rate is 0.001. You want to allocate your investment between risk-free asset and one risky portfolio. Among all the portfolios constructed in
Assume monthly risk-free rate is 0.001. You want to allocate your investment between risk-free asset and one risky portfolio. Among all the portfolios constructed in the table below., which one would you choose as your risky portfolio? Please explain and show all the calculations if necessary
Weight in Costco | Weight in Tesla | Expected Return | Volatility |
0 | 1 | 0.036531868 | 0.001324838 |
0.1 | 0.9 | 0.0346886 | 0.001095879 |
0.2 | 0.8 | 0.032845332 | 0.000937377 |
0.3 | 0.7 | 0.031002063 | 0.000849332 |
0.4 | 0.6 | 0.029158795 | 0.000831743 |
0.5 | 0.5 | 0.027315526 | 0.000884612 |
0.6 | 0.4 | 0.025472258 | 0.001007937 |
0.7 | 0.3 | 0.023628989 | 0.001201719 |
0.8 | 0.2 | 0.021785721 | 0.001465958 |
0.9 | 0.1 | 0.019942453 | 0.001800653 |
1 | 0 | 0.018099184 | 0.002205806 |
Costco | |
Expected Return | 0.018099184 |
Variance | 0.002205806 |
Standard Deviation (Volatility) | 0.046966007 |
Tesla | |
Expected Return | 0.036531868 |
Variance | 0.001324838 |
Standard Deviation (Volatility) | 0.036398322 |
Covariance | 3.90122E-06 |
Correlation | 0.002282106 |
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