Question
Based on the following historical risk, return and correlation, which of the following assets is least likely to be allocated in a portfolio with the
Based on the following historical risk, return and correlation, which of the following assets is least likely to be allocated in a portfolio with the investment objective of a required return of 7% per annum and the volatility of the portfolio to be minimised?
The constraints are that no asset can have a negative weight or a weight above 100%.
| Assets | Asset 1 | Asset 2 | Asset 3 | Asset 4 |
| Return | 4% | 6% | 8% | 10% |
| Volatility | 5% | 9% | 13% | 18% |
| Asset 1 | Asset 2 | Asset 3 | Asset 4 | |
| Asset 1 | 1 | |||
| Asset 2 | 0.8 | 1 | ||
| Asset 3 | 0.6 | 0.8 | 1 | |
| Asset 4 | -0.2 | 0.3 | 0.9 | 1 |
Group of answer choices
Asset 1
Not enough information provided to select the asset least likely to be selected in a portfolio
Asset 2
Asset 3
Asset 4
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Financial Accounting Tools for Business Decision Making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
6th Canadian edition
1118644948, 978-1118805084, 1118805089, 978-1118644942
