Question

# You are provided with 5 possible portfolios. They are made up of a combination of 3...

You are provided with 5 possible portfolios. They are made up of a combination of 3 assets: Share A, Share B and Reit A.

Table1:Potential Returns.

 Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4 Portfolio 5 Share A 58% 40% 26% 67% 100% Share B 20% 45% 74% 15% 0% REIT A 22% 15% 0% 18% 0%

Portfolio Risk Calculator:

 Return Standard deviation of return Standard deviation of excess return Weight Share A 16% 10% 10% Share B 22% 16% 16% REIT A 18% 12% 11%

Use the weightings provided in Table 1 and portfolio risk and return calculator above to calculate the following.

 Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4 Portfolio 5 Portfolio return Portfolio standard deviation Standard deviation of portfolio's excess return

 Portfoli 1 Portfoli 2 Portfoli 3 1.Portfolio Return 17.64% 19% 20.44% (Return *weight ) (16*0.58)+(22*0.2)+(18*0.22) (16*0.4)+(22*0.45)+(18*0.15) (16*0.26)+(22*0.74) (Share A* Weight)+(Share B*Weight)+(REIT A *Weight) 2.Portfolio Standard deviation 11.64% 13% 14.44% (Portfolio Standard deviation *Weight) (10*0.58)+(16*0.2)+(12*0.22) (10*0.4)+(16*0.45)+(12*0.15) (10*0.26)+(16*0.74) 3.Standard deviation of portfolio's excess return 11.42% 12.85% 14.76% (Standard deviation of excess return *weight) (10*0.58)+(16*0.2)+(11*0.22) (10*0.4)+(16*0.45)+(11*0.15) (10*0.26)+(16*0.76)

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