Two risky assets: A and B. The expected return for A is 15% and for B 30%. The variance for returns for A is 200(%2) and for B is 800(%2). The covariance between A and B returns is -0.05. T-bills give a return of 5% with a standard deviation of 0%. The investor has a risk aversion index, A=5.0. Show all work. 1. calculate the correlation between A and B 2. calculate portfolio return / standard deviation for global mvp 3. optical risky portfolio, P (expected return and SD) 4. slope of CAL 5. how much will the investor invest (A=4) in T-bills, assets A and B?
Two risky assets: A and B. The expected return for A is 15% and for B 30%. The variance for returns for A is 200(%2) and for B is 800(%2). The covariance between A and B returns is -0.05. T-bills give a return of 5% with a standard deviation of 0%. The investor has a risk aversion index, A=5.0. Show all work. 1. calculate the correlation between A and B 2. calculate portfolio return / standard deviation for global mvp 3. optical risky portfolio, P (expected return and SD) 4. slope of CAL 5. how much will the investor invest (A=4) in T-bills, assets A and B?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 3Q: Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation...
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Two risky assets: A and B.
The expected return for A is 15% and for B 30%.
The variance for returns for A is 200(%2) and for B is 800(%2).
The covariance between A and B returns is -0.05.
T-bills give a return of 5% with a standard deviation of 0%.
The investor has a risk aversion index, A=5.0. Show all work.
1. calculate the correlation between A and B
2. calculate portfolio return / standard deviation for global mvp
3. optical risky portfolio, P (expected return and SD)
4. slope of CAL
5. how much will the investor invest (A=4) in T-bills, assets A and B?
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1. To calculate the correlation between A and B, we use the formula:
VIEW2. To calculate the portfolio return /standard deviation for global minimum variance portfolio(MVP)
VIEW3. To calculate the optimal risky portfolio (P)
VIEW4. To calculate the slope of the CAL
VIEW5. To calculate how much the investor will invest in T-bills, assets A and B
VIEW
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