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Suppose you observe the following for two securities (X & Y) Outcome probability rate of return X RATE OF RETURN Y 1 0.2 12 14
Suppose you observe the following for two securities (X & Y)
Outcome | probability | rate of return X | RATE OF RETURN Y |
1 | 0.2 | 12 | 14 |
2 | 0.15 | 6 | 12 |
3 | 0.25 | 2 | 14 |
4 | 0.4 | 10 | 10 |
a) Calculate the expected return of portfolio with 40% in asset X and 60% in asset Y. [4 ]
b) Calculate the risk of this portfolio, assume Covxy = 1.
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