Lecture 5 Example

Lecture 5 Example - Expected Portfolio Return Risk&...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
State Probability Returns Squared Deviations Squared Cross-Deviations s p(s) Bull 40% 25% 10% 5% 1.02% 0.00% 0.00% 0.06% 0.00% 0.00% Bear 40% 10% -5% 5% 0.00% 0.78% 0.00% -0.06% 0.00% 0.00% Shock 20% -25% 35% 5% 2.31% 1.35% 0.00% -1.77% 0.00% 0.00% Expected Return 9.00% 9.00% 5.00% 3.34% 2.14% 0.00% -1.76% 0.00% 0.00% Expected Risk σ 18.28% 14.63% 0.00% Variance- 3.34% -1.76% 0.00% Covariance Σ -1.76% 2.14% 0.00% Matrix 0.00% 0.00% 0.00% Correlation 100.00% -65.83% 0.00% Matrix ρ -65.83% 100.00% 0.00% 0.00% 0.00% 100.00% Weights
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Expected Portfolio Return, Risk & Utility Portfolios A Utility a 50% 50% 0% 100% 9.00% 7.00% 4 8.02% b 50% 0% 50% 100% 7.00% 9.14% 4 5.33% c 100% 0% 0% 100% 9.00% 18.28% 4 2.32% r 1 (s) r 2 (s) R F p(s)[r(s)-E(r)] 2 p(s)(r i (s)-E(r i ))(r j (s)-E(r j )) E( r ) E( r P ) σ P w 1 w 2 w 3 Σ w i E( r P ) σ P 5% 7% 9% 11% 13% 15% 17% 19% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online