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2. Given: Asset 1. E(R): = 3 Var(R₂) = 1.5 Asset 2. E(R) = 5 w1 .9 w2 0 .1 E(Rp) 3 3.2 24 Var(Rp) 1.5 0.96 057

2. Given: Asset 1. E(R): = 3 Var(R₂) = 1.5 Asset 2. E(R) = 5 w1 .9 w2 0 .1 E(Rp) 3 3.2 24 Var(Rp) 1.5 0.96 057

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Compute for expected return, variance at SD. Identify the efficient set using graph. Show solutions. 

 

2 2. Given: Asset 1. E(R) 3 Var(R₂) = 1.5 = Asset 2. E(R) = 5 Var (R₂) = 4.2 Corr(R₁,R₂)= -0.7 1. Expected Return: E(R₂) (2) ch E (R₂) = w;R; +w;R; +.. +w, R 2. Variance (s²) for 2 assets 41323 w1 1 .9 3. Standard deviation (S) = square root of the variance .6 5 10 Var(R)= w2, s²;+w²; s²; + 2w;w; * Cor (RR) SS₁.2 .1 0 w2 0 .1 2 3 .4 .5 .6 7 .8 E(Rp) 3. 3.2 3.4 3.6 3.8 4.2 4.4 4.6 4.8 Var(Rp) 1.5 0.96 0.57 0.38 0.37 0.55 0.91 1.46 2.19 3.10 2.2
Transcribed Image Text:2 2. Given: Asset 1. E(R) 3 Var(R₂) = 1.5 = Asset 2. E(R) = 5 Var (R₂) = 4.2 Corr(R₁,R₂)= -0.7 1. Expected Return: E(R₂) (2) ch E (R₂) = w;R; +w;R; +.. +w, R 2. Variance (s²) for 2 assets 41323 w1 1 .9 3. Standard deviation (S) = square root of the variance .6 5 10 Var(R)= w2, s²;+w²; s²; + 2w;w; * Cor (RR) SS₁.2 .1 0 w2 0 .1 2 3 .4 .5 .6 7 .8 E(Rp) 3. 3.2 3.4 3.6 3.8 4.2 4.4 4.6 4.8 Var(Rp) 1.5 0.96 0.57 0.38 0.37 0.55 0.91 1.46 2.19 3.10 2.2
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