Given another investment with an expected value of 12 percent and a standard deviation of 2.2 percent that is countercyclical to the investment in problem 2, what is the expected value of the portfolio and its standard deviation if both are combined into a portfolio with 40 percent invested in the first investment and 60 percent in the second? Assume the correlation coefficient (rij) is –0.40.
Answer to relevant QuestionsWhat would be the portfolio standard deviation if the two investments in problem 3 had a correlation coefficient (rij) of +0.40? Recompute the answer to problem 8 based on a portfolio standard of 16 percent. In terms of capital market theory, explain why KP has increased. Why are zero-coupon bonds the most price sensitive of any type of bond issue? As part of your answer to problem 2, you computed the price of the bond [column (4)]. This is the same as the PV of cash flows in column (4). a. Recompute the price of a bond based on a 11 percent discount rate (market rate ...Why might mutual funds be particularly beneficial in the international area?
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