AllFreePapers.com - All Free Papers and Essays for All Students
Search

Modern Portfolio Theory and Investment Analysis - Chapter 4 Problem 1

Autor:   •  December 2, 2018  •  Case Study  •  814 Words (4 Pages)  •  42 Views

Page 1 of 4

Chapter 4 Problem 1

Expected return of each assets:

[pic 1]

Standart deviations of each assets:

[pic 2]

[pic 3]

Covariance of return for Asset 1 and 2

[pic 4]

Covariance values for all possible pairs

Particulars

Asset 1

Asset 2

Asset3

Asset 4

Asset 1

8

-4

12

0

Asset 2

-4

2

-6

0

Asset 3

12

-6

18

0

Asset 4

0

0

0

10.7

Correlation between asset 1 and 2 is :

[pic 5] [pic 6]  [pic 7]

Correlation values for all possible pairs:

Particulars

Asset 1

Asset 2

Asset3

Asset 4

Asset 1

1

-1

1

0

Asset 2

-1

1

-1

0

Asset 3

1

-1

1

0

Asset 4

0

0

0

1

The expected return for portfolio A:

[pic 8]

Expected Return For All Assets:

Portfolio

Expected Return %

A

9

B

13

C

12

D

10

E

13

F

10.67

G

10.67

H

12.67

I

11

Variance of Portfolio A

[pic 9]

Portfolio

Variance

Standart Deviaton

A

0.5

0.707

B

12.5

3.536

C

4.6

2.145

D

2

1.414

E

7

2.646

F

3.6

1.897

G

2

1.414

H

6.7

2.588

I

2.7

1.643

Each of the four assets in expected return and standart deviation space

[pic 10]

Chapter 4 Problem 3

The average variance of return for an individual security is 50 , The average covariance is 10

Objective is to compute the expected variance of an equally weighted portfolio of 5 , 10 ,20, 50, and 100 securities.

...

Download as:   txt (5.7 Kb)   pdf (429.5 Kb)   docx (103.3 Kb)  
Continue for 3 more pages »