A portfolio consists of three securities Prime. Pals and Son with the following parameters: Son 25...
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A portfolio consists of three securities Prime. Pals and Son with the following parameters: Son 25 14 Expected return (%) Standard deviation (%) Correlation coefficnet (Cor.): Prime & Pals Pals & Son Prime & Son Portfolio: Prime 15 10 1 2 +0.18 -0.24 -0.35 An investor can either invest in Portfolio 1 or Portfolio 2 in the proportion given below. Portfolio proportions (%) Prime Pals Pals 9 12 30 70 50 10 Son 20 20 Required: (a) Calculate the expected return and standard deviation for each of the two portfolios (2 Decimal Places). [21 Marks] (b) Explain the diversification effect and the relationship between correlation of assets. [ 6 Marks] A portfolio consists of three securities Prime. Pals and Son with the following parameters: Son 25 14 Expected return (%) Standard deviation (%) Correlation coefficnet (Cor.): Prime & Pals Pals & Son Prime & Son Portfolio: Prime 15 10 1 2 +0.18 -0.24 -0.35 An investor can either invest in Portfolio 1 or Portfolio 2 in the proportion given below. Portfolio proportions (%) Prime Pals Pals 9 12 30 70 50 10 Son 20 20 Required: (a) Calculate the expected return and standard deviation for each of the two portfolios (2 Decimal Places). [21 Marks] (b) Explain the diversification effect and the relationship between correlation of assets. [ 6 Marks]
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Answer rating: 100% (QA)
a Portfolio 1 Expected return 030 x 15 050 x 10 020 x 25 145 Standard deviation sqrt0302 x 122 0502 ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
Posted Date:
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