Problem+Set+10-1

Problem+Set+10-1 - E120 Principles of Engineering Economics...

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E120 Principles of Engineering Economics Fall 2010 Problem Set #10 1. Suppose the risk-free asset has expected return of 0.05, and the market portfolio has expected return 0.15 and standard deviation 0.18. What is the minimum standard deviation you can achieve if you desire an expected return of 10%? 2. Suppose the risk-free asset has expected return of 0.05, and the market portfolio has expected return 0.15 and standard deviation 0.18. Is it possible for you to achieve an expected return of 20% and a standard deviation of 20%? Explain. 3. Jack and Rose have decided to invest in the stock market. They both have $1,000 to invest. Suppose that there are only two stocks available in the entire market: Stock A and Stock B. The interest rate is 4 percent at which they can borrow or deposit unlimited amounts of money. They will both use the Markowitz's mean-variance model to choose their portfolios. According to Jack, the following are true for the stocks: Expected Return Standard Deviation
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Problem+Set+10-1 - E120 Principles of Engineering Economics...

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