In this question, you will be asked to calculate the variance/risk of a portfolio consisting of two assets. Consider a portfolio that only consists of asset E and asset B. E has weight of 60%, and B has weight of 40%. The variance of E is about 13%, and the variance of B is about 4%. The covariance between E and B is about 0.2. What is the variance of this portfolio? O 0.1492 0.1012 0.19 O 0.094

In this question, you will be asked to calculate the variance/risk of a portfolio consisting of two assets. Consider a portfolio that only consists of asset E and asset B. E has weight of 60%, and B has weight of 40%. The variance of E is about 13%, and the variance of B is about 4%. The covariance between E and B is about 0.2. What is the variance of this portfolio? O 0.1492 0.1012 0.19 O 0.094

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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What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation (SDi), covariance (COVij), and asset weight (Wi) are as shown below? Asset (A) E(R₂) = 25% SDA = 18% WA = 0.75 COVA, B = -0.0009 Select one: A. 13.65% B. 20 U ODN 20.0% C. 18.64% D. 22.5% Asset (B) E(R₂) = 15% SDB = 11% WB = 0.25
Use the following information: E[rXOM] = 15.6%, standard deviationyOM = 15.9% %3D E[IMSI=29.7%, standard deviationMS = 35.2% Correlation of returns: PXOM.MS = 0.139, r=10% If the optimal amount to invest in the first asset (w) is 0.43, what is the variance of the risky portfolio when w=0.43? (write in decimal format using 5 decimal places)
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PLEASE DO THIS IN EXCEL
Question 1 Are the following statements true or false? Provide a short justification for your answer. (You are evaluated on your justification.) Remember that a statement is false if any part of the statement is false. A single correct counterexample is sufficient to show that a statement is false. a) assets A, B, C, with expected returns and standard deviations: Suppose you are a mean-variance optimizer. The risk-free rate is 3%. There are three risky E [řa] = 10%, SD [FA] = 5% E [řB] = 15%, SD [řB] = 7% E [řc] = 12%, SD [řc] = 9% You cannot invest in all three risky assets. Instead, you have to choose whether to invest in only assets (A, B), or only assets (A, C). Asset B mean-variance dominates asset C, since it has higher return and lower standard deviation than asset C. Thus, as long as you are risk-averse, you would always prefer the set of assets (A, B) to the set assets (A, C). b) the same market B's. The covariance matrix between A, B, C is: Suppose the CAPM holds. Consider…

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