Risk and Return with Varying Weights ■ We want to understand all the possible (expected return, volatility) combinations that can be obtained by combining US and JP. - Take an arbitrary portfolio with weights w on US and 1 - w on JP. ■ The expected return of the portfolio is: E[R₂] = w×0.136 + (1 − w)×0.150 ■ Back to p = 27%. The variance of the portfolio return is: Var(Rp) = w²x(0.154)² + (1 − w)²×(0.230)² - +2xwx(1 - w)×0.27×0.154×0.230
Risk and Return with Varying Weights ■ We want to understand all the possible (expected return, volatility) combinations that can be obtained by combining US and JP. - Take an arbitrary portfolio with weights w on US and 1 - w on JP. ■ The expected return of the portfolio is: E[R₂] = w×0.136 + (1 − w)×0.150 ■ Back to p = 27%. The variance of the portfolio return is: Var(Rp) = w²x(0.154)² + (1 − w)²×(0.230)² - +2xwx(1 - w)×0.27×0.154×0.230
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 2P: APT
An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free...
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Hi, Please answer this question with the information on the slide attached
Take the US and JP assets we saw in class.
What is the volatility of a portfolio with w1=40% in the US asset and w2=60% in the JP asset? It's equal to ___% (answer a number with one decimal, e.g., 12.3. In the example in class it was 14.7)
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