Problem 1 Consider the following portfolio: Instructions: 1. Determine the expec

ID: 2718256 • Letter: P

Question

Problem 1
Consider the following portfolio:

Instructions:

1. Determine the expected return of the portfolio if you want to distribute your investment by 30% in A; 40% B; and 30% in C.

2. Determine the standard deviation of the portfolio.

3. Determine the expected return of the portfolio if you want to distribute your investment by 35% in A; 25% B; and 40% in C.

4. Determine the standard deviation of the portfolio.

5. Identify the distribution of investment that provides increased performance and a lower standard deviation.

Answer:1 Expected return of the portfolio=0.30*15%+0.40*25%+0.30*9%=17.2%

Answer:2 Standard deviation of the portfolio=0.30*3%+0.40*12%+0.30*3%=6.6%

Answer:3 Expected return of the portfolio=0.35*15%+0.25*25%+0.45*9%=15.55%

Answer:4 Standard deviation of the portfolio=0.35*3%+0.25*12%+0.45*3%=5.4%

Answer:5 Investment A has the the distribution of investment that provides increased performance and a lower standard deviation.

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