20228.pdf - Foxit PhantomPDF Express for HP FILE HOME EDIT COMMENT VIEW FORM PROTECT SHARE HELP a Find T SnapShot Fit Page @ 130.64% In Clipboard * D. Fit Width @ Zoom In Hand Select Select Typewriter Note POF Actual From From From From Text Annotation Sign - Rotate View * Size Fit Visible . Zoom Out Files Scanner . Blank Page Clipboard Tools Zoom Create Start 20228.pdf x Pages 9. Please answer the following sub-questions. a. Consider a portfolio with two assets, asset 1 and asset 2. Asset 1 has expected return R, and standard deviation of returns of. Asset 2 has expected return R2 and standard deviation of returns equal to zero. Derive the mathematical formula that describes the 3 mean-variance frontier between the two assets. [10 marks] b. An investor is constructing a portfolio by investing in a sovereign default-swap fund (S) and a junk-bond fund (J). The coefficient of correlation between the two funds' returns is Psy = -0.3. The expected return and the standard deviation for each fund appear in 4 percentage points on the table below: R 30% 15% 16% 8% 5 V C 41 1 5/7 130.64% 86 hp 11:31 W N A b X PDF 04/07/202220238.pdf - Foxit PhantomPDF Express for HP O FILE HOME EDIT COMMENT VIEW FORM PROTECT SHARE HELP ra Find T T 1SnapShot ) Fit Page @ 130.64% D Fit Width Zoom In Hand Select Select Typewriter Note PDF In Clipboard * Actual From From From From Text Annotation Sign . Rotate View . Size Fit Visible . Zoom Out Files . Scanner . Blank Page Clipboard Tools Zoom Create Start 20226.pdf X R Pages 30% 15% 16% 8% Find the minimum-variance portfolio that can be constructed when combining the above two assets, by estimating the investment proportion of each fund in it, its expected return and its standard deviation of return. [20 marks] 5 Version 1 Page 5 of 7 6 41 1 5/7 130.64% . O + hp W A X 11:32 N PDF 04/07/202220228.pdf - Foxit PhantomPDF Express for HP FILE HOME EDIT COMMENT VIEW FORM PROTECT SHARE HELP a Find Hand Image Link Select " Bookmark File Attachment Arrange Zoom - Video & Audio Tools Insert Arrange Start 20228.pdf x Pages c. Suppose that the risk-free interest rate is 4%, that CAPM holds and that securities S and J are the only ones in this economy. How much is the slope of the Security Market Line ? [30 marks] 10. Suppose that there are two assets, A and B, and their returns are derived by the two-factor model below: 5 The first factor has an expected rate of return of It=15% and a standard deviation 01=3%. The second factor has an expected rate of return of 12=24% and a standard deviation 02=10%. The rature hatumean the hun fastAre and the ratume hatuan tha idincuneratio samnanant of aash 41 1 6/7 130.64% . 9 hp O b 11:34 POF 04/07/2022