Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Solve and show your work for finding the standard deviation of the portfolio using two methods (i.e., Method 1: ex ante using states of nature;

Solve and show your work for finding the standard deviation of the portfolio using two methods (i.e., Method 1: ex ante using states of nature; and Method 2: matrix multiplication).

State of

Nature

Returns per State of Nature for Each Security
RF Market w x y z Portfolio
Prob; Weights 16.67% 16.67% 16.67% 16.67% 16.67% 16.67% 100.00%
Good 20% 4.00% 14.00% -1.00% 18.00% 10.00% 6.00%
Average 50% 4.00% 8.00% 6.00% 12.00% 6.20% 4.50%
Poor 30% 4.00% 2.00% 10.00% -3.40% 3.30% 3.50%
Mean
Variance
Std Dev
beta
Required Return (CML)
CML efficient (Y/N)
Required Return (SML)
SML efficient (Y/N)
Mean Var Efficient Set

Covariance RF Market w x y z Portfolio
RF
Market
w
x
y
z
Portfolio

Correlation RF Market w x y z Portfolio
RF
Market
w
x
y
z
Portfolio

Matrix Multiplication

for Portfolio Variance:

Weights' (1x6) Variance/Covariance Matrix (6X6) Weights (6x1)
Weights*Variance/Covariance matrix (1x6) Weights (6x1)
Variance of Portfolio (1x1)
Standard Deviation of Portfolio

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

Broadcasting Finance In Transition

Authors: Jay G. Blumler, T. J. Nossiter

1st Edition

0195050894, 978-0195050899

More Books

Students also viewed these Finance questions