Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Shares A and B have the following historical returns as given in the table below. You invest $1000 in share A and $3000 in share

image text in transcribed
Shares A and B have the following historical returns as given in the table below. You invest $1000 in share A and $3000 in share B, thus your portfolio has a total value of $4000. Year TA 2015 8% 2016 10% 2017 7% 2018 6% rB 2% 5% 10% 12% a) Calculate the stand-alone risk (standard deviation) for each share. Use the table for your convenience. b) Calculate what are the weights of each share in your portfolio. c) Calculate what is expected rate of return of your portfolio. Hint: first calculate what would have been the realized rate of return on the portfolio in each year. d) Calculate the risk of the portfolio, comment how does it compares with stand-alone risks

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

The Pillars Of Finance The Misalignment Of Finance Theory And Investment Practice

Authors: G. Fraser-Sampson

2014th Edition

1137264055, 978-1137264053

More Books

Students also viewed these Finance questions