Lecture7_Two_Stock_Portfolio

Lecture7_Two_Stock_Portfolio - a problem or two with...

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This is a spreadsheet that you can use as a tool to practice several things: finding expected return, variance, standard deviation, and Sharpe ratio of a two-stock portfolio with weights wA and wB: this is done in the top part of the table. You can also use this to find the weights each stock has in the market portfolio: this is done in the middle part of the page. All you have to do is come up with some reasonable numbers to put in the yellow cells, then work out the solution by yourself and verify that the solution you get matches the numbers in the blue cells. Finally, you can also find the minimum variance portfolio of stocks A and B. So rather than me writing
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Unformatted text preview: a problem or two with specific numbers, you can use this tool for as many problems as you have time to solve. Stock A Stock B Risk-Free Asset wA wB Portfolio E(R) 6.00% 15.00% 2.00% 70.00% 30.00% 8.70% Stdev(R) 10.00% 40.00% 10.44% Var(R) 0.01000 0.16000 0.01090 Covariance-0.0200 Correlation-0.5000 Sharpe Ratio 0.642 Finding the market (tangency) portfolio wA wB E(RM) Var(RM) Stdev(RM) Sharpe Ratio 0.8108 0.1892 7.70% 0.00617 7.85% 0.726 Finding the minimum variance portfolio wA wB E(R_MVP) Var(R_MVP) Stdev(R_MVP) Sharpe Ratio 0.8571 0.1429 7.29% 0.00571 7.56% 0.699...
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This note was uploaded on 12/20/2011 for the course RSM 332 taught by Professor Raymondkan during the Fall '08 term at University of Toronto- Toronto.

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