Question

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.)**

Answer #1

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)
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:______________%

Problem 11-18 Minimum Variance Portfolio (LO4, CFA4)
Asset K has an expected return of 14 percent and a standard
deviation of 33 percent. Asset L has an expected return of 8
percent and a standard deviation of 14 percent. The correlation
between the assets is 0.52. What are the expected return and
standard deviation of the minimum variance portfolio?

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. )

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

Consider two stocks, Stock D, with an expected return of 11
percent and a standard deviation of 26 percent, and Stock I, an
international company, with an expected return of 9 percent and a
standard deviation of 19 percent. The correlation between the two
stocks is –0.12. What are the expected return and standard
deviation of the minimum variance portfolio? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places.).

Asset K has an expected return of 11 percent and a standard
deviation of 26 percent. Asset L has an expected return of 9
percent and a standard deviation of 21 percent. The correlation
between the assets is 0.21. What are the expected return and
standard deviation of the minimum variance portfolio?
Expected return%
Standard deviation%

Stock 1 has a expected return of 14% and a standard deviation
of 12%.
Stock 2 has a expected return of 11% and a standard deviation
of 11%.
Correlation between the two stocks is 0.5.
Create a minimum variance portfolio with long positions in both
stocks.
What is the return on this portfolio?

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