The following table shows the expected return and standard deviation of the returns on assets A...
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The following table shows the expected return and standard deviation of the returns on assets A and B: A B 0 0,35 0,25 E(R) 0,30 0,25 Obtain the expected return and standard deviation of the returns of a portfolio composed of equal parts of both assets, for cases in which the correlation is PAB = 1, PAB = -1 and PAB = 0. Show on a graph mean-standard deviation the original assets and these three portfolios, and comment on the results in terms of the benefits of diversification in each case. What is the lowest risk that can be obtained by combining both assets in each case? Discuss the differences between them. The following table shows the expected return and standard deviation of the returns on assets A and B: A B 0 0,35 0,25 E(R) 0,30 0,25 Obtain the expected return and standard deviation of the returns of a portfolio composed of equal parts of both assets, for cases in which the correlation is PAB = 1, PAB = -1 and PAB = 0. Show on a graph mean-standard deviation the original assets and these three portfolios, and comment on the results in terms of the benefits of diversification in each case. What is the lowest risk that can be obtained by combining both assets in each case? Discuss the differences between them.
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Related Book For
Business Statistics In Practice
ISBN: 9780073401836
6th Edition
Authors: Bruce Bowerman, Richard O'Connell
Posted Date:
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