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Not sure if i did this right The following equation can be used to compute the risk of a three-security portfolio as follows: 0= WACA?
Not sure if i did this right
The following equation can be used to compute the risk of a three-security portfolio as follows: 0= WACA? + wp"OBS + wc oc +2WAWBPABOAJB+2WAWCPACO AOC +2wEWCPBCOBOC You have decided to invest 40 percent of your wealth in Security A, 30 percent in Security B, and 30 percent in Security C. The following information is available about the possible returns from the three securities: Security A Security B Security C Return Probability Return Probability Return Probability 12% 0.45 8% 0.50 16% 0.50 18 0.45 14 0.40 22 0.35 22 0.10 18 0.10 26 0.15 Compute the expected return of the portfolio and the risk of the portfolio if the correlations between returns from the three securities are PAB = 0.65; PAC =0.40; and PBC =0.65. Do not round intermediate calculations. Round your answers to two decimal places. Expected return of the portfolio: 15.389 % Risk of the portfolio: 3.10 %Step by Step Solution
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