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Unformatted text preview: that minimize portfolio variance. State p A B Depressio n 0.16% 25% Recession 0.2 0% 31% Normal 0.4 9% 22% Boom 0.3 20%15% Expected return 9.00% 13.00% Standard deviaTon 8.66% 18.62% 4 Chapter 6 Example on optimal portfolio Using the below table, (risk free rate = 5%), calculate the weights of securities A and B for the optimal portfolio State p A B Depressio n 0.16% 25% Recession 0.2 0% 31% Normal 0.4 9% 22% Boom 0.3 20%15% Expected return 9.00% 13.00% Standard deviaTon 8.66% 18.62% 5 Chapter 6 Example on portfolio efficiency Using the below information, is a $100,000 portfolio with $30,000 invested in security A and the remainder invested in security B efficient if the expected return of the market portfolio is 12% and its standard deviation is 8%? State p A B Depressio n 0.16% 25% Recession 0.2 0% 31% Normal 0.4 9% 22% Boom 0.3 20%15% Expected return 9.00% 13.00% Standard deviaTon 8.66% 18.62% 6...
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 Spring '08
 JONES
 Management, Normal Distribution, Standard Deviation, Variance, Modern portfolio theory, Cauchy distribution

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