on 7 t red d out of a question You currently have 250000 dollars invested in a portfolio consisting of Red stock and Green stock. Red stock has an expected return of 0.12 per annum and a standard deviation of 0.06. Green stock has an expected return of 0.28 per annum and a standard deviation of 0.22. Answer the following questions 2(a) to 2(c). Note: For all the calculation questions, you are only allowed to write the numerical answer you calculated for the question, please DO NOT add $, %, dollars, million, thousand, percent, space, etc. in your answers. 2(a): Suppose that the correlation coefficient between Red and Green is -1. Consider a portfolio consisting of only Red and Green stocks. What is the amount of your investment that you would place in Red stock to achieve a risk- free investment (round to the nearest dollar if needed)? [Hint: the standard deviation of a risk-free investment equals to zero] Answer: ion 8 et ered 2(b): Suppose that the correlation coefficient between Red and Green is -0.5 and that your current portfolio is made up of 40% in Red stock and 60% in Green stock. The risk free rate is 0.05 per annum. The market portfolio has an expected return of 0.18 per annum and standard deviation of 0.08. Answer the following questions i to ii. 2(b).i: Calculate the expected return of your current portfolio (Round your final answer to 3 decimal places if needed)? d out of y question Answer: ion 9 2(b).ii: Calculate the standard deviation of your current portfolio formed in question 2(b) (Round your final answer to 3 decimal places if needed)? et ered d out of Answer: a question on 7 t red d out of a question You currently have 250000 dollars invested in a portfolio consisting of Red stock and Green stock. Red stock has an expected return of 0.12 per annum and a standard deviation of 0.06. Green stock has an expected return of 0.28 per annum and a standard deviation of 0.22. Answer the following questions 2(a) to 2(c). Note: For all the calculation questions, you are only allowed to write the numerical answer you calculated for the question, please DO NOT add $, %, dollars, million, thousand, percent, space, etc. in your answers. 2(a): Suppose that the correlation coefficient between Red and Green is -1. Consider a portfolio consisting of only Red and Green stocks. What is the amount of your investment that you would place in Red stock to achieve a risk- free investment (round to the nearest dollar if needed)? [Hint: the standard deviation of a risk-free investment equals to zero] Answer: ion 8 et ered 2(b): Suppose that the correlation coefficient between Red and Green is -0.5 and that your current portfolio is made up of 40% in Red stock and 60% in Green stock. The risk free rate is 0.05 per annum. The market portfolio has an expected return of 0.18 per annum and standard deviation of 0.08. Answer the following questions i to ii. 2(b).i: Calculate the expected return of your current portfolio (Round your final answer to 3 decimal places if needed)? d out of y question Answer: ion 9 2(b).ii: Calculate the standard deviation of your current portfolio formed in question 2(b) (Round your final answer to 3 decimal places if needed)? et ered d out of Answer: a
