1. The two-asset case The expected return for asset A is 5.50% with a standard deviation of 7.00%, and the expected return for asset B is 9.75% with a standard deviation of 7.00%. Based on your knowledge of efficient portfolios, fill in the blanks in the following table with the appropriate answers. Proportion of Portfolio in Security A Proportion of Portfolio in Security B Expected Portfolio Return WA WB P Standard Deviation op Case I (PAB = -0.4) Standard Deviation op Standard Deviation op Case II (PAB = 0.3) Case III (PAB = 0.8) 1.00 0.00 5.50% 7.0 7.0 0.75 0.25 6.56% 4.8 6.7 0.50 0.50 3.8 5.6 6.6 0.25 0.75 8.69% 4.8 6.0 0.00 1.00 9.75% 7.0 7.0 7.0 The minimum risk portfolio allocation to asset A within the portfolio for case II is Therefore, you are better off
1. The two-asset case The expected return for asset A is 5.50% with a standard deviation of 7.00%, and the expected return for asset B is 9.75% with a standard deviation of 7.00%. Based on your knowledge of efficient portfolios, fill in the blanks in the following table with the appropriate answers. Proportion of Portfolio in Security A Proportion of Portfolio in Security B Expected Portfolio Return WA WB P Standard Deviation op Case I (PAB = -0.4) Standard Deviation op Standard Deviation op Case II (PAB = 0.3) Case III (PAB = 0.8) 1.00 0.00 5.50% 7.0 7.0 0.75 0.25 6.56% 4.8 6.7 0.50 0.50 3.8 5.6 6.6 0.25 0.75 8.69% 4.8 6.0 0.00 1.00 9.75% 7.0 7.0 7.0 The minimum risk portfolio allocation to asset A within the portfolio for case II is Therefore, you are better off
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:1. The two-asset case
The expected return for asset A is 5.50% with a standard deviation of 7.00%, and the expected return for asset B is 9.75% with a standard deviation
of 7.00%.
Based on your knowledge of efficient portfolios, fill in the blanks in the following table with the appropriate answers.
Proportion of Portfolio in
Security A
Proportion of Portfolio in
Security B
Expected
Portfolio Return
WA
WB
P
Standard
Deviation op
Case I
(PAB = -0.4)
Standard
Deviation op
Standard
Deviation op
Case II
(PAB = 0.3)
Case III
(PAB = 0.8)
1.00
0.00
5.50%
7.0
7.0
0.75
0.25
6.56%
4.8
6.7
0.50
0.50
3.8
5.6
6.6
0.25
0.75
8.69%
4.8
6.0
0.00
1.00
9.75%
7.0
7.0
7.0
The minimum risk portfolio allocation to asset A within the portfolio for case II is
Therefore, you are better off
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