Modern Portfolio Theory and Investment Analysis - Chapter 4 Problem 1
Autor: infinity • December 2, 2018 • Case Study • 814 Words (4 Pages) • 579 Views
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.
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