Question
Suppose you are a head of a hedge fund and are thinking to create a portfolio investing just in these three stocks. The portfolio weights,
Suppose you are a head of a hedge fund and are thinking to create a portfolio investing just in these three stocks. The portfolio weights, volatility and correlation with the market portfolio of the three stocks are given in the table below:
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| Portfolio Weight | Volatility | Correlation with the Market Portfolio |
| Yahoo | 0.25 | 12% | 0.4 |
| Microsoft | 0.35 | 25% | 0.6 |
| | 0.4 | 13% | 0.5 |
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1, If you expect to receive a rate of return of 9% on this portfolio, would you invest in this portfolio? Explain. Show Your work
2. Assume the CAPM correctly prices risk, is the market portfolio efficient? Explain why.
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The Illiterate Executive An Executives Handbook For Mastering Financial Acumen
Authors: Blair Cook
1st Edition
1460289935, 978-1460289938
