Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You have a portfolio comprising of share Mickey (M) and share Donald (D). The correlation coefficient between the two shares is -0.3983. Additional information:
You have a portfolio comprising of share Mickey (M) and share Donald (D). The correlation coefficient between the two shares is -0.3983. Additional information: Share Mickey (M) Share Donald (D) Investment amount $200 000 $300 000 Expected return 7.55% 6.55% Beta Standard deviation 1.25 6.12% 0.95 2.07% Work with four decimals throughout your calculations and round your final answers for each question to two decimal places. 1.1 1.2 1.3 Calculate the expected return of the portfolio comprising of the share Mickey (M) and share Donald (D). Calculate the total risk (standard deviation) for the portfolio. Based on your answer in Question 1.2 and the information provided, should share M and share D be combined into one portfolio? Motivate your answer by providing two reasons. 1.4 Calculate the portfolio beta.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the expected return of the portfolio we first need to calculate the weight of each share in the portfolio The total investment amount is ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started