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Suppose that reema whose degree of risk aversion is 6 d) Suppose that Reema, whose degree of risk aversion is 6, wants to select the
Suppose that reema whose degree of risk aversion is 6
d) Suppose that Reema, whose degree of risk aversion is 6, wants to select the optimal portfolio from the opportunity set. Identify the following for Reema's portfolio: d.1. Weight of X and Y (1 mark) Risk and Reema's d.2. portfolio return for (1 mark) d.3. Reema's utility value (0.5 mark) d.4. Mark Reema's portfolio on the graph in part c above (0.5 mark) e) If there exist a risk-free asset (r) that earns 4% annual return. Identify the following for the optimal risky portfolio (P). e.1. Composition of P (Weights of stock X and Y) (1 mark) e.2. (P). Return and risk of the optimal risky portfolio (1 mark) e.3. Draw the efficient frontier in the presence of a risk-free asset and mark portfolio P on the graph in part c above (0.5 mark) 1. State Probability Return on Stock X Return on Stock Y 1 0.3 6% -8% 2 0.5 8% 12% 3 0.2 -10% 18% The correlation coefficient between the two stocks rcp=0.30 d) Suppose that Reema, whose degree of risk aversion is 6, wants to select the optimal portfolio from the opportunity set. Identify the following for Reema's portfolio: d.1. Weight of X and Y (1 mark) Risk and Reema's d.2. portfolio return for (1 mark) d.3. Reema's utility value (0.5 mark) d.4. Mark Reema's portfolio on the graph in part c above (0.5 mark) e) If there exist a risk-free asset (r) that earns 4% annual return. Identify the following for the optimal risky portfolio (P). e.1. Composition of P (Weights of stock X and Y) (1 mark) e.2. (P). Return and risk of the optimal risky portfolio (1 mark) e.3. Draw the efficient frontier in the presence of a risk-free asset and mark portfolio P on the graph in part c above (0.5 mark) 1. State Probability Return on Stock X Return on Stock Y 1 0.3 6% -8% 2 0.5 8% 12% 3 0.2 -10% 18% The correlation coefficient between the two stocks rcp=0.30
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