problem_set2

problem_set2 - Economics 252 Problem Set #2 1. Suppose the...

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

View Full Document Right Arrow Icon
Economics 252 Problem Set #2 1. Suppose the typical technology stock has a return standard deviation of 50% per year. Suppose that all technology stocks are independent of each other. Suppose that the typical blue-chip stock has a return standard deviation of 10% per year. Then, how many different technology stocks would I have to include in an equally weighted portfolio to make the tech stock portfolio safer (in terms of standard deviation) than holding a single blue-chip stock? 2. Stock A has a return standard deviation of 20% and stock B has a return standard deviation of 10%. Stock A has an expected return of 20% and stock B has an expected return of 10%.? Plot the efficient portfolio frontier under the assumption that the two stocks? returns are uncorrelated with each other. Show points A and B on the plot. (For these plots, it would probably be easiest to use a spreadsheet to print the plots.) a. Show on the plot the minimum variance portfolio. Does it contain positive quantities of both A and B?
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/08/2012 for the course ECON 252 taught by Professor Robertshiller during the Spring '08 term at Yale.

Ask a homework question - tutors are online