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E(r) SD Covariance Matrix A B с 0.19 0.21 A 0.0441 0.0095 0.0076 0.15 0.15 B 0.0095 0.0225 0.0054 0.06 0.12 C 0.0076 0.0054 0.0144 ABC

E(r) SD Covariance Matrix A B с 0.19 0.21 A 0.0441 0.0095 0.0076 0.15 0.15 B 0.0095 0.0225 0.0054 0.06 0.12 C 0.0076 0.0054 0.0144 ABC

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter12: Fainancial Statement Analysis
Section: Chapter Questions
Problem 3DQ
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You are managing a stock portfolio for a client that contains three assets, A, B, C. You currently hold each in equal proportion and the portfolio has the following characteristics:

Your client asks you to add a 4th asset to the portfolio. The new portfolio will hold all assets in equal proportion. You have identified a potential asset, X. Asset X has an expected return of 12%, a Std. deviation of 36% and a correlation with all other assets in the portfolio of 0.

  1. ) The expected return of the new portfolio is:
  2. ) The variance of the new portfolio is :
  3. )The standard deviation of the new portfolio
E(r) SD Covariance Matrix A B с 0.19 0.21 A 0.0441 0.0095 0.0076 0.15 0.15 B 0.0095 0.0225 0.0054 0.06 0.12 C 0.0076 0.0054 0.0144 ABC
Transcribed Image Text:E(r) SD Covariance Matrix A B с 0.19 0.21 A 0.0441 0.0095 0.0076 0.15 0.15 B 0.0095 0.0225 0.0054 0.06 0.12 C 0.0076 0.0054 0.0144 ABC
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