UIUC FIN 300 Portfolio Expexted Return page 13

UIUC FIN 300 Portfolio Expexted Return page 13 - 0.25 17.00...

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UNIVERSITY OF ILLINOIS College of Business - Department of Finance Finance 300 (Financial Markets) Page 13 Covariance Example Stocks Scenario P r s P * r s r s - E ( r) s P * [(r s - E ( r) s )] 2 Boom 0.25 28.00 7.00 17.000 72.250 Normal 0.50 12.00 6.00 1.000 0.500 Bust 0.25 -8.00 -2.00 -19.000 90.250 E ( r) s 11.00 P * [(r s - E ( r))] 2 = Var 163.000 σ s 12.767 Bonds Scenario P r b P * r b r b - E ( r) b P * [(r b - E ( r) b )] 2 Boom 0.25 -3.00 -0.75 -10.000 25.000 Normal 0.50 7.00 3.50 0.000 0.000 Bust
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Unformatted text preview: 0.25 17.00 4.25 10.000 25.000 E ( r) b 7.00 ∑ P * [(r b- E ( r))] 2 = Var 50.000 σ b 7.071 Portfolio Scenario P r s * r b (r s * r b ) * P [r s - E ( r) s ] * [r b- E ( r) b ] P * {[r s- E ( r) s ] * [r b- E ( r) b ] } Boom 0.25-84-21-170-42.5 Normal 0.50 84 42 Bust 0.25-136-34-190-47.5 E ( r) s,b = ∑-13.00 COV s,b = ∑-90.00 ρ = COV s,b / ( σ s σ b 29-0.9969...
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This note was uploaded on 04/06/2008 for the course FIN 300 taught by Professor Jackson during the Fall '07 term at University of Illinois at Urbana–Champaign.

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