Consider two risky assets: X and Y. their expected returns are 5% and 12%, respectively. In...
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Consider two risky assets: X and Y. their expected returns are 5% and 12%, respectively. In addition, their covariance matrix and inverse of covariance matrix are [10.61 1.36 0.10 -0.045] -0.045 0.35 respectively. Suppose the risk-free rate is 1.36 3.03 K= and K-¹ = " 1%. 4.1 What are the optimal weights of the two assets for the efficient portfolio earning 7% return and what is its risk? (5 points) 4.2 What are the optimal weights of the two assets and the risk-free asset for the efficient portfolio earning 7% return and what is its risk? (4 points) 4.3 What are the implications from 4.1 and 4.2? (1 points) Consider two risky assets: X and Y. their expected returns are 5% and 12%, respectively. In addition, their covariance matrix and inverse of covariance matrix are [10.61 1.36 0.10 -0.045] -0.045 0.35 respectively. Suppose the risk-free rate is 1.36 3.03 K= and K-¹ = " 1%. 4.1 What are the optimal weights of the two assets for the efficient portfolio earning 7% return and what is its risk? (5 points) 4.2 What are the optimal weights of the two assets and the risk-free asset for the efficient portfolio earning 7% return and what is its risk? (4 points) 4.3 What are the implications from 4.1 and 4.2? (1 points)
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41The optimal weights of the two assets for the efficient portfolio earning 7 return are 05 and 05 respectively The risk of the efficient portfolio is ... View the full answer
Related Book For
Financial Accounting an introduction to concepts, methods and uses
ISBN: 978-0324789003
13th Edition
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis
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