hmk4 - Assignment 4 ( There are five problems due:...

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Assignment – 4 ( There are five problems – due: Thursday, April 14 ) 1. Suppose the expected returns and standard deviations of stocks A , B , and C are as follows E(R A ) = 0 . 15 , E(R B ) = 0 . 25 , E(R C ) = 0 . 30 , σ A = 0 . 40 , σ B = 0 . 5 , σ C = 0 . 6 . Assume that correlation (A , B) = 0 . 6 , Correlation (A , C) = 0 . 4 , and Correlation (B , C) = 0 . 5 . Calculate the expected return and standard deviation of a portfolio that is composed of 25 percent A , 25 percent B , and 50 percent C . 2. You have been provided the following data about the securities of three firms , the market portfolio , and the risk-free asset : Security Exp . Ret . Std . dev . Corr . with market Beta Firm A 0 . 102 0 . 40 ……. . 0 . 9 Firm B 0 . 165 ……. . 0 . 4 1 . 4 Firm C 0 . 094 0 . 48 0 . 6 ……. Market portfolio 0 . 11 0 . 24 ……. . ……. . Risk-free rate 0 . 03 ……. . ……. . ……. . (a)
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hmk4 - Assignment 4 ( There are five problems due:...

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