A company is considering investing in two projects: Project A and Project B. The expected return and
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A company is considering investing in two projects: Project A and Project B. The expected return and standard deviation of the return for each project are as follows:
- Project A: expected return of 10% and standard deviation of 8%
- Project B: expected return of 15% and standard deviation of 12%
The company's risk tolerance is 10%, which means that the variance of the portfolio should not exceed 1%. If the company wants to invest a total of $1,000,000 in the two projects, what is the minimum allocation to each project to meet the company's risk tolerance?
Related Book For
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
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