Question
The following table provides two risky assets for you to construct the investment opportunity sets based on the given correlation information. Constructing investment opportunity sets
The following table provides two risky assets for you to construct the investment opportunity sets based on the given correlation information.
Constructing investment opportunity sets
Complete the table of Risks and Returns of all the possible combinations.
For each correlation situation, insert a Mean-Standard Deviation chart and plotting the investment opportunity sets with varying weights on the two risky assets, then connecting the dots to show the curvature of each investment set.
Given a risk-free of 3%, draw a capital allocation line (CAL) to connect the risk-free rate and the optimal portfolio point on each curvature chart.
Please complete on excel and show work
| Assets | Expected return | Risk (STD) |
| A | 10% | 25% |
| B | 6% | 12% |
| Risk-free | 3% | 0% |
| Correlation | Coeffiecient | between | asset A | and B | ||
| -1 | -0.5 | 0 | 0.5 | 1 | ||
| Weight in Asset A | Return of the portfolio (Rp) | STD(P) | STD (P) | STD (P) | STD (P) | STD (P) |
| 0% | ||||||
| 10% | ||||||
| 20% | ||||||
| 30% | ||||||
| 40% | ||||||
| 50% | ||||||
| 60% | ||||||
| 70% | ||||||
| 80% | ||||||
| 90% | ||||||
| 100% |
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International Financial Management
Authors: Geert Bekaert, Robert J. Hodrick
4th International Edition
013284298X, 9780132842983
