For the questions, use the following averages and covariance matrix. PLEASE HELP
ID: 3437046 • Letter: F
Question
For the questions, use the following averages and covariance matrix. PLEASE HELP ASAP!
Averages
covariance matrix
1.) For a portfolio formed by 30% in asset 2 and 70% in asset 3. Calculate the return on the portfolio.
2.) Calculate the variance of the portfolio formed by 30% in asset 2 and 70% in asset 3.
3.) Using the variance from question 3b, calculate the standard deviation of the portfolio formed by 30% in asset 2 and 70% in asset 3.
4.) Using the average and standard deviation from previous questions, calculate the Sharpe ratio for the portfolio formed by 30% in asset 2 and 70% in asset 3.
5.) Calculate the average of a portfolio formed by 35% in asset 1 and 65% in asset 2.
6.) Calculate the variance of a portfolio formed by 35% in asset 1 and 65% in asset 2.
7.) Using the variance from question 3f, calculate the standard deviation for the portfolio formed by 35% in asset 1 and 65% in asset 2.
8.) Using the average and standard deviation from previous questions, calculate the Sharpe ratio for the portfolio formed by 35% in asset 1 and 65% in asset 2.
9.) Which of the portfolios offer greater return per unit of risk taken?
a. The portfolio formed by 30% in asset 2 and 70% in asset 3
b. The portfolio formed by 35% in asset 1 and 65% in asset 2
c. Both give the same return per unit of risk
Explanation / Answer
Sol)
a) For a portfolio formed by 30% in asset 2 and 70% in asset 3. Calculate the return on the portfolio.
Assets 2 3
Returns 0.30 0.70
Expected return= (2*0.30+3*0.70) = 2.7
2) Variance = (22 * 0.30)+(32 * 0.70) = 7.5
3) variance = Sqrt(variance) = 2.738
5) average of a portfolio formed by 35% in asset 1 and 65% in asset 2.. Calculate the return on the portfolio.
Assets 1 2
Returns 0.35 0.65
Expected return= (1*0.35+2*0.65) = 1.65
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