Question
You are a risk averse investor and want portfolio with the minimum amount of risk. You plan to construct your portfolio with an Equity ETF
You are a risk averse investor and want portfolio with the minimum amount of risk. You plan to construct your portfolio with an Equity ETF (ETFE) and a Bond ETF (ETFB). You chose these ETFs because the correlation between the two securities is -1.0. ETFE has an expected rate of return of 14% and a standard deviation of 28%. ETFB has an expected rate of return of 6% and a standard deviation of 12%.
How much of the portfolio in percentage terms would you put into each Security to construct the minimum risk portfolio?
What is the standard deviation of the minimum risk portfolio?
What is the expected rate of return of the portfolio?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
First lets define the following parameters 1 Rate of return of ETFE Re 014 or 14 2 Standard deviatio...
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Step: 2
Step: 3
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Principles of Finance
Authors: Scott Besley, Eugene F. Brigham
6th edition
9781305178045, 1285429648, 1305178041, 978-1285429649
