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I plugged the information in but dont understand B &C and how to get Standard Deviation on A Suppose the U.S. Index has an expected
I plugged the information in but dont understand B &C and how to get Standard Deviation on A
Suppose the U.S. Index has an expected return of 10% and a standard deviation of 15%. The Latin America Index has an expected return of 15% and a standard deviation of 30%. The two indices have a correlation coefficient of 0.30. Plug in these numbers into the worksheet "2 securities, 100 portfolios on my file PS7 student worksheets for parts b and c below. Calculate (using formulas, not the Excel file) the expected return and standard deviation of a portfolio that is weighted 79% in the U.S. and 21% in Latin America. What portfolio (weightings) consisting of both the U.S. and Latin America indices has the same standard deviation as being 100% invested in the U.S.? What advantage does this portfolio offer versus being 100% invested in the U.S. Index? What portfolio (weightings) consisting of both the U.S. and Latin America indices has the smallest possible standard deviation? 0.1 Index 1 Index 2 Expected retur 0.1000 0.1500 Std. Deviation 0.1500 0.3000 Correlation = 0.3000 Covariance 0.0135 Expected return versus standard deviation 17.00% 15.00% E 13.00% X 11.00% e Weight in Weight in Index 1 Index 2 Std. Deviation Exp. Return 1.001 0.00 15.00% 10.00% 0.99 0.01 14.94% 10.05% 0.98 0.02 14.89% 10.10% 0.97 0.03 14.84% 10.15% 0.96 0.04 14.80% 10.20% 0.95 0.05 14.77% 10.25% 0.94 0.06 14.74% 10.30% 0.93 0.07 14.72% 10.35% 0.92 0.08 14.70% 10.40% 0.91 0.09 14.69% 10.45% 0.90 0.10 14.68% 10.50% 0.89 0.11 14.68% 10.55% 0.88 0.12 14.69% 10.60% 0.87 0.13 14.70% 10.65% 0.86 0.14 14.72% 10.70% 0.85 0.15 14.74% 10.75% 0.84 0.16 14.77% 10.80% 0.83 0.17 14.80% 10.85% 0.82 0.18 14.84% 10.90% 0.81 0.19 14.89% 10.95% 0.80 0.20 14.94% 11.00% 0.79 0.21 15.00% 11.05% 0.78 0.22 15.06% 11.10% 0.77 0.23 15.13% 11.15% 0.76 0.24 15.20% 11.20% 0.75 0.25 15.28% 11.25% 0.74 0.26 15.36% 11.30% 0.73 0.27 15.45% 11.35% 0.72 0.28 15.54% 11.40% t 9.00% d R 7.00% e t u 5.00% 10.00% 15.00% 30.00% 35.00% r 20.00% 25.00% Standard Deviation n 0.71 070 0.69 0.68 0.67 0.66 0.65 0.64 0.63 0.62 0.61 0.60 0.59 0.58 0.57 0.56 0.55 0.54 0.53 0.52 0.51 0.50 0.49 0.48 0.47 0.46 0.45 0.44 0.43 0.42 0.41 0.40 0.39 0.38 0.37 0.36 0.29 0.30 0.31 0.32 0.33 0.34 0.35 0.36 0.37 0.38 0.39 0.40 0.41 0.42 0.43 0.44 0.45 0.46 0.47 0.48 0.49 0.50 0.51 0.52 0.53 0.54 0.55 0.56 0.57 0.58 0.59 0.60 0.61 0.62 0.63 0.64 15.64% 15.75% 15.85% 15.97% 16.08% 16.21% 16.33% 16.46% 16.60% 16.74% 16.88% 17.02% 17.17% 17.33% 17.48% 17.64% 17.81% 17.98% 18.15% 18.32% 18.50% 18.67% 18.86% 19.04% 19.23% 19.42% 19.61% 19.81% 20.00% 20.20% 20.41% 20.61% 20.82% 21.03% 21.24% 21.45% 11.45% 11.50% 11.55% 11.60% 11.65% 11.70% 11.75% 11.80% 11.85% 11.90% 11.95% 12.00% 12.05% 12.10% 12.15% 12.20% 12.25% 12.30% 12.35% 12.40% 12.45% 12.50% 12.55% 12.60% 12.65% 12.70% 12.75% 12.80% 12.85% 12.90% 12.95% 13.00% 13.05% 13.10% 13.15% 13.20%Step by Step Solution
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