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Unformatted text preview: n 2 .0% 40% 45% 50% 55% 60% 65% 70% 75% A Stock 1 Stock 2 C Standard Mean deviation return of return 12% 35% 18% 50% Covariance(r1,r2) 0.08350 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Proportion of stock 1 Proportion of stock 2 Expected portfolio return Standard deviation of portfolio return Answer Target portfolio return Proportion of stock 1 0.25 0.75 #MACRO? 16.50% #MACRO? 42.38% #MACRO? 14% 0.6666667 #MACRO? Standard deviation of return 12% 35% 18% 50% Mean return 17 18 19 20 21 22 23 24 25 26 27 28 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? 0.6667 #MACRO? 0.3333 #MACRO? 14.00% #MACRO? 34.54% #MACRO? A Stock 1 Stock 2 C Standard Mean deviation return of return 12% 35% 18% 50% Covariance(r1,r2) 0.08350 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Proportion of stock 1 Proportion of stock 2 Expected portfolio return Standard deviation of portfolio return SOLUTION 1 TO THE PROBLEM Target portfolio standard deviation...
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