You have just collected your lump sum from the sale of your building which amounts to GHC100,000.00 in Government of Ghana Treasury Bills (T-bills), GHC60,000.00 in Stocks and the remaining amount in Government of Ghana Bonds Available (3) %. Stocks provide expected return of eight (8) % and a standard deviation of 20%, while Bonds provide an expected return of eight (8) % and a standard deviation 10%. Correlation coefficients between these investment vehicles are as follows: Between Stock and Bond = 0.25, Between Stock and T-bills= -0.08, Between Bond and T-bills = 0.15 Required: 1.Expected return on the portfolio.   2. Risk and coefficient of variation on the portfolio.

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
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You have just collected your lump sum from the sale of your building which amounts to GHC100,000.00 in Government of Ghana Treasury Bills (T-bills), GHC60,000.00 in Stocks and the remaining amount in Government of Ghana Bonds Available (3) %. Stocks provide expected return of eight (8) % and a standard deviation of 20%, while Bonds provide an expected return of eight (8) % and a standard deviation 10%. Correlation coefficients between these investment vehicles are as follows: Between Stock and Bond = 0.25, Between Stock and T-bills= -0.08, Between Bond and T-bills = 0.15

Required:

1.Expected return on the portfolio.

 

2. Risk and coefficient of variation on the portfolio.

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