Question: Security A offers an expected return of 15 percent with a standard deviation of 7 percent. Security B offers an expected return of 9 percent

Security A offers an of 15 percent with a standard deviation of 7 percent. Security B offers an of 9 percent with a standard deviation of 4 percent. The correlation between the returns of A and B is +0.6. If an investor puts one-fourth of his wealth in A and three-fourths in B, what is the and risk (standard deviation) of this portfolio?

Step by Step Solution

★★★★★

3.51 Rating (168 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

E R p 2515 759 ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

138-B-C-F-C-V (239).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

What is meant by the term decision analysis?

Asset K has an expected return of 15 percent and a standard deviation of 41 percent. Asset L has an expected return of 6 percent and a standard deviation of 10 percent. The correlation between the...

The Optima Mutual Fund has an expected return of 20%, and a volatility of 20%. Optima claims that no other portfolio offers a higher Sharpe ratio. Suppose this claim is true, and the risk-free...

A stock has an expected return of 13.4 percent, its beta is 1.60, and the risk-free rate is 5.5 percent. What must the expected return on the market be?

Security A offers an expected return of 15 percent with a standard deviation of 7percent.SecurityBoffersanexpectedreturnof9percentwithastandarddevia- tion of 4 percent. The correlation between the...

You must allocate your wealth between two securities. Security 1 offers an expected return of 10% and has a standard deviation of 30%. Security 2 offers an expected return of 15% and has a standard...

Question 2 (Parts (a), (b) and (c) are separate so you cannot use information from one in any other.) (a) Suppose the capital asset pricing model holds. The market portfolio has an expected return of...

Security F has an expected return of 20.0 percent and a standard deviation of 30 percent per year. Security G has an expected return of 25.0 percent and a standard deviation of 54 percent per year....

Security F has an expected return of 11.3 percent and a standard deviation of 44.3 percent per year. Security G has an expected return of 16.3 percent and a standard deviation of 63.3 percent per...

Security F has an expected return of 10.9 percent and a standard deviation of 43.9 percent per year. Security G has an expected return of 15.9 percent and a standard deviation of 62.9 percent per...

There are seven isomeric compounds with the formula C4H10O. Write their structures and classify each compound according to its functional group.

The correlation coefficient is always: Select one: O a. >-1 and 1 and 0 O d. none of these

determine whether the following sequence converges o r diverges: { ( 1 - n 3 3 n 2 - 7 n 3 ) s i n - 1 ( 4 + n + n 3 1 - 5 n 2 - 2 n 3 ) }

Scott Enterprises is considering a project that has the following cash flow and cost of capital (r) data. What is the project's NPV? Note that if a project's expected NPV is negative, it should be...

What is the grid? What are the parameters used to define grid quality?

Houston Company is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the cost of capital or negative, in both cases it...

1. Where do you think that lean-six sigma can be used effectively? 2. What is the different between Lean-Six Sigma and traditional quality improvement? 3. There is different services implementation...

The function of the permanent magnet in electromechanical type spinning wheel kilowatt-hour meter is a. None of the above b. Exerting an opposing torque necessary for calibrating the meter c....

2 Explain how three examples of stakeholders may use published accounts.

According to the pecking order theory, a firm has no particular optimal capital structure. Companies prefer internal financing to external financing, and, given that external financing is necessary,...

Explain the research results of Modigliani and Miller in the area of capital structure. L0358

What is the relationship between the value of a firm and its capital structure without a corporate income tax? With a corporate income tax? L0358

A father's will leave R30 000 in a trust for three children aged 5,8 and 10, with direction that each child should receive an equal amount at age 21 . If the trust earns interest at 3% p.a....

You just graduated from college and are starting your new job. You realized the importance to save for the future and have figured out that you will save $ 3 , 0 0 0 per month for the next 1 0 years;...

1.Your parents promise to give you $83 a month for 4 years, starting at the end of this month, to help you out. At a 8.15 percent APR discount rate, what are these payments worth to you right now?...