10UIUC%20FIN%20300%20Portfolio%20Variance%20Instructor%20SP10

10UIUC%20FIN%20300%20Portfolio%20Variance%20Instructor%20SP10

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College of Business - Department of Finance - Finance 300 (Financial Markets) Professor James Jackson Portfolio Construction Analysis Using Variance and Standard Deviation Calculate the variance and standard deviation of the following portfolios w x σ x ρ x , y w y σ y 0.5000 0.2004 0.5000 0.5000 0.1336 σ p 2 = 0.0212 σ p = 0.1456 COV x,y = σ x * σ y ρ x , y COV x,y = 0.2004* 0.1336 0.5000 COV x,y = 0.01338672 σ 2 p = (σ x * W x ) 2 + 2 * ( W x * COV x,y * W y ) + ( W y * σ y ) 2 σ 2 p = ( 0.2004 * 0.5000) 2 + 2 * (0.5000* 0.01338672* 0.5000) + (0.5000* 0.1336) 2 σ 2 p = 0.01004004 + 0.00669336 + 0.00446224 σ 2 p = 0.02119564 σ p = 0.14559 w x σ x ρ x , y w y σ y 0.6000 0.2004 0.8000 0.4000 0.1336 σ p 2 = 0.0276 σ p = 0.1661 COV x,y = σ x * σ y ρ x , y COV x,y = 0.2004* 0.1336 0.8000 COV x,y = 0.021418752 σ 2 p = (σ x * W x ) 2 + 2 * ( W x * COV x,y * W y ) + ( W y * σ y ) 2 σ 2 p = ( 0.2004 * 0.6000) 2 + 2 * (0.6000* 0.021418752* 0.4000) + (0.4000* 0.1336)
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This note was uploaded on 02/10/2011 for the course FIN 300 taught by Professor Staff during the Spring '08 term at University of Illinois, Urbana Champaign.

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10UIUC%20FIN%20300%20Portfolio%20Variance%20Instructor%20SP10

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