hw5 - ORIE 4630 D. Ruppert Homework #5 due Friday, Oct 1,...

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ORIE 4630 — D. Ruppert Homework #5 — due Friday, Oct 1, 2010 Note: Students are required to work independently on homework. 1. Suppose the risk-free rate is 2% and there is one risky asset that has an expect return of 5% and a standard deviation of the return of 15%. You want to invest in these two assets and you want a return standard deviation of 6%. (a) What proportion of your portfolio should be in the risk-free asset? (b) What will be the expected return on your portfolio? 2. Suppose risky assets A and B have expected returns equal to 3% and 7%, respectively, and their return standard deviations are 5% and 16%, respectively. Their returns have a correlation of 0.55. Assume that only these two assets and the risk-free asset are available. (a) If you have a portfolio that is 80% asset A and 20% asset B, what are the expected return and return standard deviation for your portfolio? (b) What is the minimum variance portfolio containing only assets A and B (and
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This note was uploaded on 09/20/2011 for the course ORIE 4630 at Cornell University (Engineering School).

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hw5 - ORIE 4630 D. Ruppert Homework #5 due Friday, Oct 1,...

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