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Explain step-by-step about how to get value in each row Let R1 and R2 be the returns for two securities (security 1 and security 2
Explain step-by-step about how to get value in each row
Let R1 and R2 be the returns for two securities (security 1 and security 2 ) with E(R1)=0.03 and E(R2)= 0.08,VAR(R1)=0.02,VAR(R2)=0.05, and COV(R1,R2)=0.01. (a) Find the mean and standard deviation of a portfolio that is 50% in security 1. (b) How much of the portfolio (i.e., the percentage) will an investor invest in security 1 if the investor wants to minimize risk? \begin{tabular}{lcccc} \hline% in 1 & % in 2 & E(rP) & var(rP) & P \\ \hline 150 & -50 & 0.5% & 7.25% & 26.93% \\ 100 & 0 & 3 & 2 & 14.14 \\ 75 & 25 & 4.25 & 1.063 & 10.31 \\ 50 & 50 & 5.5 & 1.25 & 11.18 \\ 25 & 75 & 6.75 & 2.563 & 16.01 \\ 0 & 100 & 8 & 5 & 22.36 \\ -25 & 125 & 10.5 & 13.25 & 36.4 \\ \hline \end{tabular} Let R1 and R2 be the returns for two securities (security 1 and security 2 ) with E(R1)=0.03 and E(R2)= 0.08,VAR(R1)=0.02,VAR(R2)=0.05, and COV(R1,R2)=0.01. (a) Find the mean and standard deviation of a portfolio that is 50% in security 1. (b) How much of the portfolio (i.e., the percentage) will an investor invest in security 1 if the investor wants to minimize risk? \begin{tabular}{lcccc} \hline% in 1 & % in 2 & E(rP) & var(rP) & P \\ \hline 150 & -50 & 0.5% & 7.25% & 26.93% \\ 100 & 0 & 3 & 2 & 14.14 \\ 75 & 25 & 4.25 & 1.063 & 10.31 \\ 50 & 50 & 5.5 & 1.25 & 11.18 \\ 25 & 75 & 6.75 & 2.563 & 16.01 \\ 0 & 100 & 8 & 5 & 22.36 \\ -25 & 125 & 10.5 & 13.25 & 36.4 \\ \hline \end{tabular}Step by Step Solution
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