25 Jul CALCULATE THE EXPECTED RETURN AND STANDARD DEVIATION OF THE FOLLOWING PORTFOLIOS
The financial markets of country X are not very developed: there are only two companies A and B wh Show more The financial markets of country X are not very developed: there are only two companies A and B which are traded. The expected rate of return on A is 8% and 14% on B; the standard deviations of their rates of return are 5% for A and 10% for B and the correlation coefficient between their returns is 0.1. a. Calculate the expected return and standard deviation of the following portfolios: portfolio Percentage in A Percentage in B P1 0 100 P2 40 60 P3 60 40 P4 80 20 P5 100 0 b. Represent in a graph (with the standard deviation of the portfolio on the horizontal axis and the expected returns on the vertical axis) the points corresponding to the combinations of expected return-standard deviation for each of the above portfolios. Draw approximately theset of all feasible expected returns-standard deviations that can be obtained by investing in the two stocks A and B. c. Which of the above portfolios are ecient? Show less
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