Question

he expected return and standard deviation of a portfolio that is 30 percent invested in 3 Doors, Inc., and 70 percent invested in Down Co. are the following: 3 Doors, Inc. Down Co. Expected return, E(R) 18 % 14 % Standard deviation, σ 61 26 What is the standard deviation if the correlation is +1? 0? −1? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. )

Answer #1

a)

b)

c)

The expected return and standard deviation of a portfolio that
is 50 percent invested in 3 Doors, Inc., and 50 percent invested in
Down Co. are the following:
3 Doors, Inc.
Down Co.
Expected return, E(R)
19
%
14
%
Standard deviation, σ
62
24
What is the standard deviation if the correlation is +1? 0? −1?
(Do not round intermediate calculations. Enter your answer
as a percent rounded to 2 decimal places. )

Use the following information to calculate the expected return
and standard deviation of a portfolio that is 50 percent invested
in 3 Doors, Inc., and 50 percent invested in Down Co.: (Do
not round intermediate calculations. Enter your answers as a
percent rounded to 2 decimal places.)
3 Doors, Inc.
Down Co.
Expected return, E(R)
19
%
14
%
Standard deviation, σ
49
51
Correlation
.34

Use the following information to calculate the expected return
and standard deviation of a portfolio that is 60 percent invested
in 3 Doors, Inc., and 40 percent invested in Down Co.: (Do
not round intermediate calculations. Enter your answers as a
percent rounded to 2 decimal places.)
3
Doors, Inc.
Down Co.
Expected return, E(R)
11
%
10
%
Standard deviation, σ
31
33
Correlation
.16

Problem 11-14 Minimum Variance Portfolio (LO4, CFA4)
Refer to the table below:
3 Doors, Inc.
Down Co.
Expected return, E(R)
11
%
12
%
Standard deviation, σ
26
23
Correlation
0.21
Using the information provided on the two stocks in the table
above, find the expected return and standard deviation on the
minimum variance portfolio. (Do not round intermediate
calculations. Enter your answers as a percent rounded to 2 decimal
places.)

Refer to the table below: 3 Doors, Inc. Down Co. Expected
return, E(R) 12 % 13 % Standard deviation, σ 30 15 Correlation .36
Using the information provided on the two stocks in the table
above, find the expected return and standard deviation on the
minimum variance portfolio. (Do not round intermediate
calculations. Enter your answers as a percent rounded to 2 decimal
places.)

Refer to the table below:
3 Doors, Inc.
Down Co.
Expected return, E(R)
10
%
11
%
Standard deviation, σ
25
22
Correlation
0.20
Using the information provided on the two stocks in the table
above, find the expected return and standard deviation on the
minimum variance portfolio. (Do not round intermediate
calculations. Enter your answers as a percent rounded to 2 decimal
places.)

Use the following information to calculate the percentage
standard deviation of a portfolio that is 42.8 percent invested in
3 Doors, Inc., and the rest invested in Down Co.:
3 Dorrs, Inc.
Down Co.
Expected return
21%
13%
Standard deviation
50
35
Correlation
0.43

Refer to the table below:
3 Doors, Inc.
Down Co.
Expected return, E(R)
17
%
7
%
Standard deviation, σ
32
16
Correlation
.19
Using the information provided on the two stocks in the table
above, find the expected return and standard deviation on the
minimum variance portfolio
Expected return:____________%
Standard deviation:______________%

Asset K has an expected return of 19 percent and a standard
deviation of 34 percent. Asset L has an expected return of 7
percent and a standard deviation of 18 percent. The correlation
between the assets is 0.43. What are the expected return and
standard deviation of the minimum variance portfolio? (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 2 decimal places.)
Expected return%
Standard deviation%

An investment has an expected return of 9.25 percent and
standard deviation of 3.38 percent. Another investment has an
expected return of 14 percent and a standard deviation of 4.93
percent. What is the expected return of the portfolio and its
standard deviation if both are combined into a portfolio with 70
percent invested in the first investment and 30 percent in the
second? Assume the correlation coefficient (ij) is -.40

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