Question
Here are some historical data on the risk characteristics of Ford and Harley Davidson. Yearly standard deviation of return (%) Ford Harley Davidson 23.5
Here are some historical data on the risk characteristics of Ford and Harley Davidson. Yearly standard deviation of return (%) Ford Harley Davidson 23.5 26.4 Assume the standard deviation of the return on the market was 12.3%. a. The correlation coefficient of Ford's return versus Harley Davidson was 0.40. What is the standard deviation of a portfolio invested half in each share? b. What is the standard deviation of a portfolio invested one-third in Ford, one-third in Harley Davidson, and one-third in risk-free Treasury bills? c. What is the standard deviation if the portfolio is split evenly between Ford and Harley Davidson and is financed at 50% margin, that is, the investor puts up only 50% of the total amount and borrows the balance from the broker? d. What combination of Ford and Harley Davidson offers the minimum risk? (For all requirements, use decimals, not percent, in your calculations. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started