Xuemeihas been managing five portfolios for the last year. She has collected the followinginformation and has begun to make several calculations for five two stock portfolios:12345a)b)c)rate of return on NCP = 12%rate of return on NAB = 10%standard deviation of NCP = 15%standard deviation of NAB = 19%covariance = 0.0064Portfolio Weight in NAB Portfolio Returns30%40%60%55%20%PortfolioVariancePortfolioStandardDeviation3Assist Xuemei by finishing the calculations for her. That is, complete the missing figuresin the table above.Explain to Xuemei why the portfolio standard deviation is not simply the weightedaverage of the standard deviation of the stocks in the portfolio.Find the weight for NAB that would result in the lowest portfolio variance. Do not restrictyour enquiry to the five portfolios.

Please refer to the excel spreadsheet for answers. For formulae reference, the first cell is A1.…

a) Assist Xuemei by finishing the calculations for her. That is, complete the missing figures in the table above. b) Explain to Xuemei why the portfolio standard deviation is not simply the weighted average of the standard deviation of the stocks in the portfolio. c) Find the weight for NAB that would result in the lowest portfolio variance. Do not restrict your enquiry to the five portfolios.

a) Assist Xuemei by finishing the calculations for her. That is, complete the missing figures in the table above. b) Explain to Xuemei why the portfolio standard deviation is not simply the weighted average of the standard deviation of the stocks in the portfolio. c) Find the weight for NAB that would result in the lowest portfolio variance. Do not restrict your enquiry to the five portfolios.

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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