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

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

This preview shows pages 1–2. Sign up to view the full content.

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)

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## 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.

### Page1 / 3

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

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online