PS3Answers

PS3Answers - Problem 1) Security Exp Ret ST Dev A 12% 15% B...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Problem 1) Security Exp Ret ST Dev A 12% 15% B 20% 45% Part 1 The question asks for portfolio weights spaced 10% apart, but 5% gives a bet er grid for the graph. Exp Ret-1-0.5 0.5 1 0.0 % 20.0 % 45.0 % 45.0 % 45.0 % 45.0 % 45.0 % 5.0 % 19.60% 42.0 % 42.38% 42.76% 43.13% 43.50% 10.0 % 19.20% 39.0 % 39.7 % 40.53% 41.27% 42.0 % 15.0 % 18.80% 36.0 % 37.18% 38.32% 39.42% 40.50% 20.0 % 18.40% 3 .0 % 34.60% 36.12% 37.59% 39.0 % 25.0 % 18.0 % 30.0 % 32.04% 3 .96% 35.7 % 37.50% 30.0 % 17.60% 27.0 % 29.51% 31.82% 3 .97% 36.0 % 35.0 % 17.20% 24.0 % 27.01% 29.72% 32.20% 34.50% 40.0 % 16.80% 21.0 % 24.56% 27.6 % 30.45% 3 .0 % 45.0 % 16.40% 18.0 % 2 .16% 25.65% 28.73% 31.50% 50.0 % 16.0 % 15.0 % 19.84% 23.72% 27.04% 30.0 % 5 .0 % 15.60% 12.0 % 17.64% 21.87% 25.40% 28.50% 60.0 % 15.20% 9.0 % 15.59% 20.12% 23.81% 27.0 % 65.0 % 14.80% 6.0 % 13.7 % 18.52% 2 .29% 25.50% 70.0 % 14.40% 3.0 % 12.28% 17.10% 20.84% 24.0 % 75.0 % 14.0 % 0.0 % 1 .25% 15.91% 19.49% 2 .50% 80.0 % 13.60% 3.0 % 10.82% 15.0 % 18.25% 21.0 % 85.0 % 13.20% 6.0 % 1 .05% 14.43% 17.15% 19.50% 90.0 % 12.80% 9.0 % 1 .91% 14.23% 16.2 % 18.0 % 95.0 % 12.40% 12.0 % 13.27% 14.43% 15.50% 16.50% 10 .0 % 12.0 % 15.0 % 15.0 % 15.0 % 15.0 % 15.0 % 150.0 % 8.0 % 45.0 % 38.97% 31.82% 2 .50% 0.0 % xA 0.2 0.20.190.190.180.180.180.170.170.160.160.160.150.150.140.140.140.130.130.120.12 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5 Mean-Standard Deviation Frontiers-1-0.5 0.5 1 Expected Return Standard Deviation Part 2 For perfect negative cor elation we have: Hence, Hence, the miniminum variance portfolio has 25% invested in as et B and 75% invested in as et A. You can also read this of the above chart. Se also the framed box in the table in part 1. Part 3 For perfect positive cor elation we have: Hence, Hence, invest 150% in as et A and -50% in as et B. This requires that you can sel as t B short. If you can ot, invest 10 % in as et A and nothing in as et B....
View Full Document

This document was uploaded on 06/09/2010.

Page1 / 7

PS3Answers - Problem 1) Security Exp Ret ST Dev A 12% 15% B...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online