You have just collected your lump sum from the sale of your building which amounts to GHC100,000.00 in Government of Ghana Treasury Bills (T-bills), GHC60,000.00 in Stocks and the remaining amount in Government of Ghana Bonds Available (3) %. Stocks provide expected return of eight (8) % and a standard deviation of 20%, while Bonds provide an expected return of eight (8) % and a standard deviation 10%. Correlation coefficients between these investment vehicles are as follows: Between Stock and Bond = 0.25, Between Stock and T-bills= -0.08, Between Bond and T-bills = 0.15 Required: 1.Expected return on the portfolio. 2. Risk and coefficient of variation on the portfolio.
You have just collected your lump sum from the sale of your building which amounts to GHC100,000.00 in Government of Ghana Treasury Bills (T-bills), GHC60,000.00 in Stocks and the remaining amount in Government of Ghana Bonds Available (3) %. Stocks provide expected return of eight (8) % and a standard deviation of 20%, while Bonds provide an expected return of eight (8) % and a standard deviation 10%. Correlation coefficients between these investment vehicles are as follows: Between Stock and Bond = 0.25, Between Stock and T-bills= -0.08, Between Bond and T-bills = 0.15 Required: 1.Expected return on the portfolio. 2. Risk and coefficient of variation on the portfolio.
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 9P
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You have just collected your lump sum from the sale of your building which amounts to GHC100,000.00 in Government of Ghana Treasury Bills (T-bills), GHC60,000.00 in Stocks and the remaining amount in Government of Ghana Bonds Available (3) %. Stocks provide expected return of eight (8) % and a standard deviation of 20%, while Bonds provide an expected return of eight (8) % and a standard deviation 10%. Correlation coefficients between these investment vehicles are as follows: Between Stock and Bond = 0.25, Between Stock and T-bills= -0.08, Between Bond and T-bills = 0.15
Required:
1.Expected return on the portfolio.
2. Risk and coefficient of variation on the portfolio.
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