2. (2 pts.) The spreadsheet Homework 3 Data in the tab Q2 - template' contains the...
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2. (2 pts.) The spreadsheet "Homework 3 Data in the tab Q2 - template' contains the monthly returns of the S&P 500 index and Fairfield Sentry Fund, which was a Madoff "feeder fund." In this question we will consider portfolios formed from combining the S&P 500 and Fairfield Sentry. (a) Let E[rFs] be the expected monthly return on Fairfield Sentry, E[rsp] be the expected monthly return on the S&P 500 index, FS be the standard deviation of the monthly returns of Fairfield Sentry, sp be the standard deviation of the monthly returns of the S&P 500, and p be the correlation coefficient between the returns of Fairfield Sentry and the returns of the S&P 500 index. - Using the data in the spreadsheet Homework 3 Data in the tab Q2 template' estimate the expected returns E[rFs] and E[rsp], the standard deviations FS and sp, and the correlation p. 1 2. (2 pts.) The spreadsheet "Homework 3 Data in the tab Q2 - template' contains the monthly returns of the S&P 500 index and Fairfield Sentry Fund, which was a Madoff "feeder fund." In this question we will consider portfolios formed from combining the S&P 500 and Fairfield Sentry. (a) Let E[rFs] be the expected monthly return on Fairfield Sentry, E[rsp] be the expected monthly return on the S&P 500 index, FS be the standard deviation of the monthly returns of Fairfield Sentry, sp be the standard deviation of the monthly returns of the S&P 500, and p be the correlation coefficient between the returns of Fairfield Sentry and the returns of the S&P 500 index. - Using the data in the spreadsheet Homework 3 Data in the tab Q2 template' estimate the expected returns E[rFs] and E[rsp], the standard deviations FS and sp, and the correlation p. 1
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