Problem 1 *** NOTE: No copying answers from other questions in this system are i
ID: 2718265 • Letter: P
Question
Problem 1
*** NOTE: No copying answers from other questions in this system are incorrect. IT IS VERY IMPORTANT TO COMPLETE THE ENTIRE EXERCISE. INCLUDE ALL CALCULATIONS. THANK
Consider the following portfolio:
Instructions:
1. Determine the expected return of the portfolio if you want to distribute your investment by 30% in A; 40% B; and 30% in C.
2. Determine the standard deviation of the portfolio.
3. Determine the expected return of the portfolio if you want to distribute your investment by 35% in A; 25% B; and 40% in C.
4. Determine the standard deviation of the portfolio.
5. Identify the distribution of investment that provides increased performance and a lower standard deviation.
*** NOTE: No copying answers from other questions in this system are incorrect. IT IS VERY IMPORTANT TO COMPLETE THE ENTIRE EXERCISE. INCLUDE ALL CALCULATIONS. THANK
Financial Instrument Expected Return 150 25% 9% Standard Deviation 3% 12% 3%Explanation / Answer
Answer:1 Expected return of the portfolio
=0.30*15%+0.40*25%+0.30*9%
=4.5%+10%+2.7
=17.2%
Answer:2 Standard deviation of the portfolio
=0.30*3%+0.40*12%+0.30*3%
=0.9%+4.8%+0.9%
=6.6%
Answer:3 Expected return of the portfolio
=0.35*15%+0.25*25%+0.40*9%
=5.25%+6.25%+3.6%
=15.1%
Answer:4 Standard deviation of the portfolio
=0.35*3%+0.25*12%+0.40*3%
=1.05%+3%+1.2%
=5.25%
Answer:5 Investment A has the the distribution of investment that provides increased performance and a lower standard deviation.
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