fm3_problems08

# 08350 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

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

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Proportion of stock 1 Stock 1 Stock 2 Covariance(r1,r2) Correlation(r1,r2) Proportion of stock 1 Proportion of stock 2 0.25 0.75 #MACRO? 16.50% #MACRO? 42.38% #MACRO? 45% 1.462378 #MACRO? Standard deviation of return 12% 35% 18% 50% 0.08350 0.47714 #MACRO? 0.0000 #MACRO? 1.0000 #MACRO? Expected portfolio return Standard deviation of portfolio return 18.00% #MACRO? 50.00% #MACRO? SOLUTION 2 TO THE PROBLEM Target portfolio standard deviation Proportion of stock 1 45% 0.15806 #MACRO? Standard deviation of return 12% 35% 18% 50% Mean return 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 D Mean return 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 B Stock 1 Stock 2 Covariance(r1,r2) Correlation(r1,r2) Proportion of stock 1 Proportion of stock 2 Expected portfolio return Standard deviation of portfolio return 0.08350 0.47714 #MACRO? 0.1581 #MACRO? 0.8419 #MACRO? 17.05% #MACRO? 45.00% #MACRO? This problem was solved in Mathematica. It's a pain in the ass! There are two solutions, as shown below: E F A 2 3 4 5 6 7 8 9 10 11 12 13 Stock 1 Sto...
View Full Document

## This document was uploaded on 03/29/2014.

Ask a homework question - tutors are online