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
Related questions
Question
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.
- ) The expected return of the new portfolio is:
- ) The variance of the new portfolio is :
- )The standard deviation of the new portfolio
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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