Question
We have only two risky assets in the market with the following risk and return: Expected Return Standard Deviation Stocks 20% 25% Bonds 15% 15%
We have only two risky assets in the market with the following risk and return:
|
| Expected Return | Standard Deviation |
| Stocks | 20% | 25% |
| Bonds | 15% | 15% |
The correlation between the two risky assets is: 0.5 and the risk free in the market is 8%.
- Find the weight of Stocks and Bonds in the optimal portfolio. Calculate the return and standard deviation of the optimal portfolio.
- Calculate the standard deviation of portfolio (P) with an expected return of 15% on the CAL.
Find the weight of Stocks, Bonds and risk free on portfolio P.
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The Handbook Of Financial Modeling
Authors: Jack Avon
2nd Edition
1484265394, 978-1484265390
