week 3 home work

# week 3 home work - w 1 r w r = Chapter 7 Michael C Ehrhardt...

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2c3bbab94ebdfc4afa80fc2a9c0f7f2b05500117.xls Chapter 7 Michael C. Ehrhardt Page 1 06/15/2011 7.4 ATTAINABLE PORTFOLIOS: THE TWO ASSET-CASE Asset A Asset B Expected return, r h 12% 18% 40% 60% The expected return on the portfolio is the weighted average of the expected returns on asset A and asset B. The standard deviation of the portfolio, σ p , is not a weighted average. It is: Standard deviation, Using the equations above, we can find the expected return and standard deviation of a portfolio with different percents invested in each asset. B A AB A A 2 B 2 A 2 A 2 A p ) W 1 ( W 2 ) W 1 ( W σ ρ - + - + = B ^ A A ^ A p ^ r )

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Unformatted text preview: w 1 ( r w r-+ = 2c3bbab94ebdfc4afa80fc2a9c0f7f2b05500117.xls Chapter 7 Michael C. Ehrhardt Page 2 06/15/2011 Correlation = 0.2 1.00 0.00 12.00% 40.0% 0.90 0.10 12.60% 37.7% 0.80 0.20 13.20% 36.4% 0.70 0.30 13.80% 36.2% 0.60 0.40 14.40% 37.2% 0.50 0.50 15.00% 39.2% 0.40 0.60 15.60% 42.2% 0.30 0.70 16.20% 45.9% 0.20 0.80 16.80% 50.2% 0.10 0.90 17.40% 54.9% 0.00 1.00 18.00% 60.0% Proportion of Portfolio in Security A (Value of w A ) Proportion of Portfolio in Security B (Value of 1-w B ) r p σ p...
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## This note was uploaded on 06/15/2011 for the course FI515 FI515 taught by Professor Fi515 during the Spring '10 term at Keller Graduate School of Management.

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week 3 home work - w 1 r w r = Chapter 7 Michael C Ehrhardt...

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