Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider two asset classes: Stocks and Bonds. You estimate the following parameters for these two asset class funds. correlation matrix b/n Stocks and Bonds E(r)

Consider two asset classes: Stocks and Bonds. You estimate the following parameters for these two asset class funds. correlation matrix b/n Stocks and Bonds E(r) sd(r) Stocks Bonds Stocks 9% 15% 1 0.5 Bonds 8% 9% 0.5 1 Consider a $110,000 portfolio consisting of $40,000 in Stocks and $70,000 in Bonds. So, the portfolio is 36.36% in Stocks and 63.64% in Bonds. Given the expected return on the portfolio is 8.36%, and the standard deviation of the portfolio return is 9.68%, what is the 2.5% value at risk (note: the 95% confidence interval lower limit on the portfolio value is the value of the portfolio at this level of loss)? (use 2 decimals without $, so a loss of -$10.00 is -10.00) with steps please

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Corporate Finance Principles And Practice

Authors: Denzil Watson, Antony Head

5th Edition

0273725343, 978-0273725343

More Books

Students also viewed these Finance questions

Question

=+1. Do you think Nike is sufficiently responsible and ethical?

Answered: 1 week ago

Question

=+What would you leave out to allow readers to share their wisdom?

Answered: 1 week ago