An investor has £100,000 to invest in shares of Trent or Severn the expected returns and standard deviations of which are as follows.
The correlation coefficient between those two shares is -0.2.

Required
a. Calculate the portfolio expected returns and standard deviations for the following allocations.

b. Calculate the minimum standard deviation available by varying the proportion of Trent and Severn shares in the portfolio.
c. Create a diagram showing the feasible set and the efficient frontier.
d. Select an optimal portfolio for a slightly risk-averse investor using indifference curves.

Transcribed Image Text:

Trent Severn 10 20 12 Portfolio Trent (%) Severn (%) 100 75 9 100