Question
Suppose an investor is considering to buy share in CDE Ltd and ABC Ltd, which has a market price Rs 250 and Rs 300 today
Suppose an investor is considering to buy share in CDE Ltd and ABC Ltd, which has a market price Rs 250 and Rs 300 today respectively.
CDE Ltd | ABC Ltd | ||||
Economic Conditions | Probability | Share Price | Dividend | Share Price | Dividend |
% | Rs | Rs | |||
Scenario 1 | 25 | 306 | 4 | 355 | 3 |
Scenario 2 | 75 | 287 | 5 | 345 | 2 |
The investor want to hold 40% of share in CDE Ltd and 60% in ABC Ltd’s shares for one year. Calculate the following:
- Individual expected return for each company
- Individual standard deviation for each company
- Expected return of portfolio based on the choice of the investor
- Standard deviation of portfolio based on the choice of the investor
Calculate the proportion that the investor should invest to achieve minimum variance portfolio.
Step by Step Solution
3.42 Rating (149 Votes )
There are 3 Steps involved in it
Step: 1
The expected Return of an investment reflects or show the rate at which one can expect to earn on a ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get StartedRecommended Textbook for
Introduction To Derivatives And Risk Management
Authors: Don M. Chance, Robert Brooks
10th Edition
130510496X, 978-1305104969
Students also viewed these Finance questions
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
View Answer in SolutionInn App