3. How risky is your portfolio if you have invested 50% to security 1 and 50% to security 2? What if based on your research, the risk will be minimized if you changed the composition of your portfolio to be 20% of security 1 and the rest to security 2. Is your analysis correct?

3. How risky is your portfolio if you have invested 50% to security 1 and 50% to security 2? What if based on your research, the risk will be minimized if you changed the composition of your portfolio to be 20% of security 1 and the rest to security 2. Is your analysis correct?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Show your excel work working for the following question round up to two decimal places if necessary.

3. How risky is your portfolio if you have invested 50% to security 1 and 50% to security 2?
What if based on your research, the risk will be minimized if you changed the composition of your portfolio
to be 20% of security 1 and the rest to security 2. Is your analysis correct?
State of Nature
1
2
3
4
5
Probability
0.35
0.15
0.10
0.10
0.30
Return, Security 1
-20%
15
25
45
60
Return, Security 2
10%
-13
-5
20
25

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