Question
Consider that you have $4,332,989 to invest across three assets using the price weighted methodology. Your analysis of these assets has provided the information in
Consider that you have $4,332,989 to invest across three assets using the price weighted methodology.
Your analysis of these assets has provided the information in the two tables below.
To 2 decimal places answer the following questions. (Note: numbers in red are negative)
Asset | A | B | C |
Price at beginning of the year (in $) | 15.55 | 137.22 | 88.14 |
Expected price at the end of the year (in $) | 18.22 | 164.77 | 104.12 |
Standard deviation (%) | 36.40 | 41.50 | 32.10 |
Correlation | A | B | C |
A | 1.00 | -0.12 | 0.78 |
B | -0.12 | 1.00 | 0.44 |
C | 0.78 | 0.44 | 1.00 |
Required
- What is the expected compound annual growth rate of return for this portfolio, in percentage terms? (1 mark)
- What is the expected continuously compounded return on this portfolio in percentage terms? (1 mark)
- In dollars and cents, what is the expected value of this portfolio after 12 months? (1 mark)
- What is the standard deviation of this portfolio, in percentage terms? (6 marks)
Hint: I suggest you copy the table below into your notes and use it to calculate your answer one number has been given to you. Note the number in red is a negative number
Variance table | A | B | C |
A |
| -0.00066645 |
|
B |
|
|
|
C |
|
|
|
Column totals |
|
|
|
Portfolio Variance |
|
|
|
Portfolio Standard Deviation |
|
|
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started