QUESTION 1 Use the following information to calculate the percentage expected re

Question

QUESTION 1

Use the following information to calculate the percentage expected return a portfolio that is 47.5 percent invested in 3 Doors, Inc., and the rest invested in Down Co.:

3 Dorrs, Inc.

Down Co.

Expected return

28%

5%

Standard deviation

35

11

Correlation

72

QUESTION 2

Use the following information to calculate the percentage standard deviation of a portfolio that is 61.4 percent invested in 3 Doors, Inc., and the rest invested in Down Co.:

3 Dorrs, Inc.

Down Co.

Expected return

16%

11%

Standard deviation

41

33

Correlation

0.76

3 Dorrs, Inc.

Down Co.

Expected return

28%

5%

Standard deviation

35

11

Correlation

72

Explanation / Answer

Question 1:

Expected return = 0.475 * 28% + 0.525 * 5%

= 15.925%

Question 2:

Expected standard deviation = sqrt[(0.614 * 41%)2 + (0.386 * 33%)2 + 2 * 0.76 * 0.614 * 0.386 * 41% * 33%]

= 35.82%

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.