Question

Following information is available about two securities which
constitute a portfolio:

Security

Expected return Std. deviation%

A 14% 40

B 18% 20

Correlation coefficient (A,B) is -0.45. The portfolio consists of 40% of A and 60% of B. Find out the expected returns and standard deviation of the portfolio.

Answer #1

Calculations-

Please upvote if the ans is helpful.In case of doubt,do comment.Thanks.

If you have one security with an expected return of 7% and a
standard deviation of 2% and a second security with an expected
return of 13% and a standard deviation of 2.4%, what would be the
standard deviation of a portfolio that consists of 30% of the first
security and 70% of this second security if the correlation
coefficient between the two securities is -.30?

You must allocate your wealth between two securities. Security 1
offers an expected return of 10% and has a standard deviation of
30%. Security 2 offers an expected return of 15% and has a standard
deviation of 50%. The correlation between the returns on these two
securities is 0.25.
a. Calculate the expected return and standard deviation for each
of the following portfolios, and plot them on a graph:
% Security
1
% Security
2
E(R)
Standard
Deviation
100
0...

security proportion portfolio expected return
standard deviation
A 50% 15% 18%
B 50% 24% 24%
correlation coefficient 0.35
Calculate a) i. Expected return of each portfolio ii. Standard
deviation of each portfolio
b. advice management on which portfolio to invest in

You have been given information about the expected performance
of two securities, A and B, over the next year. Assume that the
performance of the securities largely follow the performance of the
economy. For the particular year, four scenarios of economic
performance are expected for each respective security and are as
advised below.
Based on this information, you have been requested to undertake
a performance analysis with a view to forming a two-security
portfolio. The correlation coefficient of the securities...

a) Calculate the expected return andstandard deviation of a portfolio invested in the
following two risky assets.SecurityWE(r)σA40%1018.63B60%58.27Correlation coefficient ρ= -
0.49b) Calculate the expected return of a
complete portfolio invested equally in the risky portfolio
calculated previously (a) and risk-free asset with 4% return.
Compare your results?

The following data are
available for two securities:
Asset
A
Asset
B
Expected Return
10%
10%
Standard Deviation
3%
3%
An an investor forms a
portfolio of 50% in Asset A and 50% in Asset B. If the correlation
between the two assets is 1.0, the coefficient of
variation for the portfolio is closest to:
Multiple Choice
0.30.
0.03.
0.0009.
3.33.
0.10.

As an analyst you have gathered the following information:
Security
Expected Annual Return
Expected Standard Deviation
Correlation between Security and the Market
Security 1
11%
25%
0.6
Security 2
11%
20%
0.7
Security 3
14%
20%
0.8
Market
10%
15%
1.0
(i). Compute the total variance on all
securities and identify the security which has the highest
total risk?
(ii). Compute the market risk for all
securities and identify the security which has the highest and
least market risk?
(iii)....

Suppose the characteristics of security A and B are given as
follow:
Expected return Standard deviation Stock A 12% 8% Stock B 18%
15%
Correlation coefficient between return of stock A and B is
0.5.
What is the expected value and standard deviation of return of
minimum variance portfolio constructed from stock A and B?

You have the following assets available to you to invest in:
Asset
Expected Return
Standard Deviation
Risky debt
6%
0.25
Equity
10%
.60
Riskless debt
4.5%
0
The coefficient of correlation between the returns on the risky
debt and equity is 0.72
2D. Hector has a coefficient of risk aversion of 1.8. What
percentage of his assets should he invest in the risky
portfolio?
2E. What would the expected return be on Hector’s
portfolio?
2F. What would the standard deviation...

An investor can design a risky portfolio based on two stocks, A
and B. Stock A has an expected return of 18% and a standard
deviation of return of 20%. Stock B has an expected return of 14%
and a standard deviation of return of 5%. The correlation
coefficient between the returns of A and B is .50. The risk-free
rate of return is 10%. The proportion of the optimal risky
portfolio that should be invested in stock A is...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 2 minutes ago

asked 5 minutes ago

asked 5 minutes ago

asked 6 minutes ago

asked 7 minutes ago

asked 7 minutes ago

asked 12 minutes ago

asked 12 minutes ago

asked 12 minutes ago

asked 17 minutes ago

asked 17 minutes ago