Question
Suppose that a portfolio consist of three securities: A, B and C with expected rates of return of 5%, 9% and 14% respectively. Find the
Suppose that a portfolio consist of three securities: A, B and C with expected rates of return of 5%, 9% and 14% respectively. Find the expected rate of return on each of the following two portfolios of these securities:
Portfolio A where wA = wB = wC
Portfolio B where wA = wB = 2wC
Assume that you currently have $10,000 and that the risk of each portfolio is 10%.
- Which portfolio which you choose and why?
- How much will you have invested in each security in each instance?
- What is the expected value of the portfolio one year from today?
- What is the expected return on the portfolio in $ terms, assuming no taxes nor fees?
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Public Finance In Theory And Practice
Authors: Richard Abel Musgrave, Peggy B. Muscrave
5th Edition
0070441278, 978-0070441279
