1.Stock B has expected return of 16% and standard deviation of 35%. Stock C has

Question

1.Stock B has expected return of 16% and standard deviation of 35%.
Stock C has expected return of 12% and standard deviation of 22%.
Their returns have correlation of 0.1474.
Form a portfolio with expected return of 13%.

2.Stock B has expected return of 16% and standard deviation of 35%.
Stock C has expected return of 12% and standard deviation of 22%.
Their returns have correlation of 0.15.
Find the minimum variance portfolio.

A.The weight of stock B is 1; the weight of stock C is 0. B.The weight of stock B is 0.75; the weight of stock C is 0.25. C.The weight of stock B is 0.5; the weight of stock C is 0.5. D.The weight of stock B is 0.25; the weight of stock C is 0.75. E.The weight of stock B is 0; the weight of stock C is 1.

2.Stock B has expected return of 16% and standard deviation of 35%.
Stock C has expected return of 12% and standard deviation of 22%.
Their returns have correlation of 0.15.
Find the minimum variance portfolio.

A.The weight of stock B is 1; the weight of stock C is 0. B.The weight of stock B is 0.75; the weight of stock C is 0.25. C.The weight of stock B is 0.5; the weight of stock C is 0.5. D.The weight of stock B is 0.25; the weight of stock C is 0.75. E.The weight of stock B is 0; the weight of stock C is 1.

Explanation / Answer

2. Weight=(0.22*0.22-0.01155)/(0.22*0.22+0.35*0.35-2*0.01155)=0.25

Covariance=0.15*0.22*0.35=-0.01155

weight of c=1-0.25=0.75

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.