Question
There are two securities under consideration for forming a portfolio - SafThere are two securities under consideration for forming a portfolio - Safety First Ltd
There are two securities under consideration for forming a portfolio - SafThere are two securities under consideration for forming a portfolio - Safety First Ltd and Reasonable Risk Ltd. With expected returns of 10% and 20% respectively, and risk as measured by standard deviation of 0.15 and 0.30 respectively. a) Determine the profile of return and risk for different portfolio consisting of two shares assuming co-efficient of correlation of I) +1.0 ii) +0.3 iii) 0.0 and iv) - 1.00. b) Also find the portfolio with least risk for each co-efficient of correlation, its return and risk. c) Under what condition of co-efficient of correlation it is advisable to have the portfolio with combination of Safety First and Reasonable Risk? d) Is it possible to have a zero risk portfolio by combining the two stocks? If yes, under what conditions?ety First Ltd and Reasonable Risk Ltd. With expected returns of 10% and 20% respectively, and risk as measured by standard deviation of 0.15 and 0.30 respectively. a) Determine the profile of return and risk for different portfolio consisting of two shares assuming co-efficient of correlation of I) +1.0 ii) +0.3 iii) 0.0 and iv) - 1.00. b) Also find the portfolio with least risk for each co-efficient of correlation, its return and risk. c) Under what condition of co-efficient of correlation it is advisable to have the portfolio with combination of Safety First and Reasonable Risk? d) Is it possible to have a zero risk portfolio by combining the two stocks? If yes, under what conditions?
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