5. The universe of available securities includes two risky stock funds, A and B, and T-bills. The data for the universe are as follows: A B T-bills Expected Return 10% 30% 5 Standard Deviation 20% 60% 0 The correlation coefficient between funds A and B is -0.2. a. Compute the covariance between the funds. b. Find the optimal risky portfolio, P, and its expected return and standard deviation. c. Find the slope of the CAL supported by T-bills and portfolio P. d. How much will an investor with A = 5 invest in funds A and B and in T-bills?
5. The universe of available securities includes two risky stock funds, A and B, and T-bills. The data for the universe are as follows: A B T-bills Expected Return 10% 30% 5 Standard Deviation 20% 60% 0 The correlation coefficient between funds A and B is -0.2. a. Compute the covariance between the funds. b. Find the optimal risky portfolio, P, and its expected return and standard deviation. c. Find the slope of the CAL supported by T-bills and portfolio P. d. How much will an investor with A = 5 invest in funds A and B and in T-bills?
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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![5. The universe of available securities includes two risky stock funds, A and B, and T-bills. The data for the
universe are as follows:
A
B
T-bills
Expected Return
10%
30%
5
Standard Deviation
20%
60%
0
The correlation coefficient between funds A and B is -0.2.
a. Compute the covariance between the funds.
b. Find the optimal risky portfolio, P, and its expected return and standard deviation.
c. Find the slope of the CAL supported by T-bills and portfolio P.
d. How much will an investor with A = 5 invest in funds A and B and in T-bills?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F76121cbb-ebb8-47e2-8127-40376f0bcbd8%2Fa0c2af5e-af77-40e5-8bec-64b6d21a8eb3%2Fpq7eplq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:5. The universe of available securities includes two risky stock funds, A and B, and T-bills. The data for the
universe are as follows:
A
B
T-bills
Expected Return
10%
30%
5
Standard Deviation
20%
60%
0
The correlation coefficient between funds A and B is -0.2.
a. Compute the covariance between the funds.
b. Find the optimal risky portfolio, P, and its expected return and standard deviation.
c. Find the slope of the CAL supported by T-bills and portfolio P.
d. How much will an investor with A = 5 invest in funds A and B and in T-bills?
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