Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Generic numerical entry instructions: Enter only your final numerical answer, rounded and expressed as requested and the only non-number you should enter (if appropriate) is

image text in transcribed

Generic numerical entry instructions: Enter only your final numerical answer, rounded and expressed as requested and the only non-number you should enter (if appropriate) is a period as 12.34 or a minus sign immediately in front of an answer to denote a negative number. The system will insert a comma for you for large numbers. Do not include an equals sign, dollar sign, percent sign, quotes, a space, any text, or punctuation (except the period or minus sign if appropriate). For example, if asked to round to the nearest 2 decimal places, -$1,234.567 should be entered as-1234.57, not as - $1,234.57 with the dollar sign, not as (1234.57) with parentheses, and not as-1234.56 which is rounded incorrectly. If asked for the nearest integer, enter 1234 and nothing else. The negative sign (if needed) should be to the left of the + sign on your keyboard. A rate of return of 12.36% rounded to the nearest 3 decimal places should be entered as 0.124, not as 12.4%, not as 0.123, not as 0.1236, etc., but only as 0.124). Please read again how your answer is to be expressed before entering it. The risk-free rate is 2%. Portfolio A has an expected return of 10% and a standard deviation of 18%. You currently have XA = 48% of your wealth invested in Portfolio A and the rest invested in the risk-free asset. You have decided to use Portfolio B (which has an expected return of 12% and a standard deviation of 25%). instead of Portfolio A but wish to have the same overall expected return as before. You will thus now allocate XB% of your total wealth to Portfolio B (note XB may differ from XA) and the rest to the risk-free asset. What is the overall standard deviation you will face in your complete portfolio (considering you will invest in both Portfolio B and the risk-free)? Enter the standard deviation in decimal form and rounded accurately to four decimal places (e.g., 20.456% should be entered as 0.2046 and not any other way)

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

Step: 3

blur-text-image

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

Elements Of Financial Risk Management

Authors: Peter Christoffersen

2nd Edition

0128102357, 9780128102350

More Books

Students also viewed these Finance questions

Question

=+ Is the information source free from bias on the subject?

Answered: 1 week ago

Question

=+ Is the information source knowledgeable about the subject?

Answered: 1 week ago

Question

=+2. How will it be used?

Answered: 1 week ago