Solution_Practice Problems for Midterm

I 1 40 1 30 42 var ri var i rm

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Unformatted text preview: tocks is given by Rp = ! Ri . Therefore, the i=1 T variance of this portfolio is 2 2 10 " 10 1 % " 10 1 Var (!i ) 1 % " 10 1 % (.30) = 4.9% Var $ ! Ri ' = Var $ ! !i Rm + ! "i ' = $ ! !i ' Var ( Rm ) + = 0.04 + 10 10 # i=1 10 & # i=1 10 & # i=1 10 & i=1 10 Therefore, the standard deviation of the portfolio is 22.14%. 40 1 8. An equally ­weighted portfolio of 40 stocks is given by Rp = ! Ri . Therefore, the i=1 T variance of this portfolio is 2 2 40 " 40 1 % " 40 1 Var (!i ) 1 % " 40 1 % (.30) = 4.2% Var $ ! Ri ' = Var $ ! !i Rm + ! "i ' = $ ! !i ' Var ( Rm ) + = 0.04 + 40 40 # i=1 40 & # i=1 40 & # i...
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