Suppose that a portfolio consists of two assets A and B whose returns are given by RA = RM + uA and RB = 2RM + uB, where RM is the market return, which is uncertain, and where uA and uB are uncorrelated shocks with expected value of zero and variance of 0.01. Suppose RM has expected value of 0.05 and a variance of 0.01. Calculate the expected return and variance of both assets A and B.

Suppose that a portfolio consists of two assets A and B whose returns are given by RA = RM + uA and RB = 2RM + uB, where RM is the market return, which is uncertain, and where uA and uB are uncorrelated shocks with expected value of zero and variance of 0.01. Suppose RM has expected value of 0.05 and a variance of 0.01. Calculate the expected return and variance of both assets A and B.

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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