2. Section 2 - 15 Marks Revis Question 1 The following risky portfolios are available for investment. Expected Return (%) Standard Deviation (96) A B 10 12.5 23 21 DEF G H 15 16 17 18 18 20 25 29 29 32 35 45 a) Five of the above portfolios are efficient, and three are not. Which are inefficient ones? b) Suppose you are prepared to tolerate a standard deviation of 25%. What is the maximum expected return that you can achieve if you cannot borrow or lend? c) What is your optimal strategy if you can borrow or lend at 12% and are prepared to tolerate a standard deviation of 25%? What is the maximum expected return that you can achieve with this risk? d) Compute the expected return and risk of the portfolio made of 50% E and 50% F, assuming E an F have perfect positive correlation. e) Compute the expected return and risk of the portfolio made of 50% E and 50% F, assuming Ean Fhave perfect negative correlation Note: Op = (WACA? + wg? Og + 2WAWBOA OBPAB)1/2 Metti Online Assessment 2010-2021 Need Help? Contact us HE N w] 3 P x] Ps Ihr Bena MU O Capstock A S Shift