Question

You are constructing a portfolio from two assets. The first asset has an expected return of 7.7% and a standard deviation of 7.8%. The second asset has an expected return of 10.2% and a standard deviation of 12.6%. You plan to invest 41% of your money in the first asset, and the rest in asset 2. If the assets have a correlation coefficient of -0.61, what will the standard deviation of your portfolio be?

Answer #1

You are constructing a portfolio of two assets, asset X and
asset Y. The expected
returns of the assets are 7 percent and 20 percent, respectively.
The standard
deviations of the assets are 15 percent and 40 percent,
respectively. The
correlation between the two assets is .30 and the risk-free rate is
2 percent.
Required:
a) What is the optimal Sharpe ratio in a portfolio of the two
assets?
b) What is the smallest expected loss for this portfolio over...

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...

The expected return of Asset A and Asset B are 15% and 20%
respectively, and the standard deviation of the two assets are 20%
and 30% respectively. The correlation coefficient between the two
assets is zero. Suppose you form a portfolio using the two assets,
and the expected return of your portfolio is 22.5%. Find out the
standard deviation of your portfolio.

There are 2 assets. Asset 1: Expected return 7.5%, standard
deviation 9% Asset 2: Expected return 11%, standard deviation 12%.
You are not sure about the correlation between 2 assets. You hold
30% of your portfolio in asset 1 and 70% in asset 2.
What is the highest possible variance of your portfolio?
Hint 1: Think how the portfolio variance depends on the
correlation between 2 assets.
Hint 2: Think which values the correlation between Asset 1 and
Asset 2...

You are creating a portfolio of two stocks. The first one has a
standard deviation of 21% and the second one has a standard
deviation of 34%. The correlation coefficient between the returns
of the two is 0.2. You will invest 38% of the portfolio in the
first stock and the rest in the second stock. What will be the
standard deviation of this portfolio's returns? Answer in percent,
rounded to two decimal places (e.g., 4.32%=4.32).

You are going to invest in Asset J and Asset S. Asset J has an
expected return of 13.8 percent and a standard deviation of 54.8
percent. Asset S has an expected return of 10.8 percent and a
standard deviation of 19.8 percent. The correlation between the two
assets is .50. What are the standard deviation and expected return
of the minimum variance portfolio? (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 2 decimal places.)...

You put half of your money in a stock portfolio that has an
expected return of 14% and a standard deviation of 36%. You put the
rest of your money in a risky bond portfolio that has an expected
return of 6% and a standard deviation of 12%. The stock and bond
portfolio have a correlation 0.35. The standard deviation of the
resulting portfolio will be ________________. Use Portfolio
variance formula A. more than 18% but less than 24% B....

Risky Asset A and Risky Asset B are combined so that the new
portfolio consists of 70% Risky Asset A and 30% Risky Asset
B. If the expected return and standard deviation of
Asset A are 0.08 and 0.16, respectively, and the expected return
and standard deviation of Asset B are 0.10 and 0.20, respectively,
and the correlation coefficient between the two is 0.25: (13
pts.)
What is the expected return of the new portfolio consisting of
Assets A & B...

Consider a portfolio that consist of 2 assets A and B;
Asset
Expected Return
Standard Deviation
Correlation
A
20%
10%
B
40%
20%
A&B
-1
Compute the asset weights (WA and WB) so that an investor
obtains a zero risk portfolio. Show all your workings and
calculations.

1. There are 2 assets you can invest in: a risky portfolio with
an expected return of 6% and volatility of 15%, and a government
t-bill (always used as the 'risk-free' asset) with a guaranteed
return of 1%. Your risk-aversion coefficient A = 4, and the utility
you get from your investment portfolio can be described in the
standard way as U = E(r) - 1/2 * A * variance. Assume that you can
borrow money at the risk-free rate....

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