1. assume that XYZ has an expected return of 5% and a standard deviation of 25%. ABC has an expected return of 9% and a standard deviation of 14%. Assume that the correlation between XYZ and ABC is 6. Further assume that you plan to invest $350,000 of your wealth in XYZ and $250,000 in ABC. Determine the expected return and the standard deviation of the portfolio, respectively.
2. Assume that the correlation coefficient of ABC with XYZ of problem 1 is = -1. How much you invest in each security to obatin the riskless hedge? you are determining the actual dollar amount invested in each security.
3. Assume that the correlation coefficient of ABC with XYZ of problem 1 is equal to 1. Determine the expected return and standard deviation of the portfolio.