Question sixCakulate the expected retum and risk of a portfolio comprising two securities, assuming that theportfolio weights are 0.75 for security A and 0.25 for secuity B. The expected retum for securityA is 18 per cent and its standard deviation is 12 per cent, while the expected retum and standarddeviation for security B are 22 per cent and 20 per cent respectively. The correation between thetwo securities is 0.6.Question seven21Shares A, B and C have expected rates of retum of 6% pa and standard deviations ofretums of 10%pa. The coefficients of corelation between the retums areA and B0.9A and C0.2B and C 0.2(a) Calculate the risk ofa portfolio of 40% A, 40% B, and 20% C.(b) Suggest a portfolio with bwer risk.(c) What practical difficulties would an investment manager face when cakuating the risk of aportfolio of shares?

Portfolio Risk: Portfolio risk is the measurement of variance between the assets and the targeted…

Answered: Cakulate the expected retun and risk of…

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Finance

Cakulate the expected retun and risk of a portfolio

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 9PROB

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