Recall from class that the population variance and standard deviation of portfolio has the following formulas....
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Recall from class that the population variance and standard deviation of portfolio has the following formulas. With two assets A and B: If the portfolio weight on asset A is w and the the portfolio weight on asset B wB, then rPwAA+wBB Var(P) = (w4)² Var(4) + (wB)² Var(B) +wAwB Cov(A,B)+wBwA Cov(rA, pB). With more than two assets: If the portfolio weight on asset i is w², and asset i has return ri, then N r² = Σw²ri pP i=1 N N N Var(r) = Σ (w²)² Var(r²) + [[w²w³ Cov(r², r³) i=1 Suppose that an investor holds a portfolio of bonds X, Y and Z. Portfolio weights of the three assets are 20%, 50% and 30%, respectively. The table below shows the variance-covariance matrix of the three assets. What is the standard deviation of the portfolio? Z 0.0350 X Y 0.0150 0.0500 0.0250 Z 0.0350 0.0250 0.0100 X Y 0.0200 0.0150 Recall from class that the population variance and standard deviation of portfolio has the following formulas. With two assets A and B: If the portfolio weight on asset A is w and the the portfolio weight on asset B wB, then rPwAA+wBB Var(P) = (w4)² Var(4) + (wB)² Var(B) +wAwB Cov(A,B)+wBwA Cov(rA, pB). With more than two assets: If the portfolio weight on asset i is w², and asset i has return ri, then N r² = Σw²ri pP i=1 N N N Var(r) = Σ (w²)² Var(r²) + [[w²w³ Cov(r², r³) i=1 Suppose that an investor holds a portfolio of bonds X, Y and Z. Portfolio weights of the three assets are 20%, 50% and 30%, respectively. The table below shows the variance-covariance matrix of the three assets. What is the standard deviation of the portfolio? Z 0.0350 X Y 0.0150 0.0500 0.0250 Z 0.0350 0.0250 0.0100 X Y 0.0200 0.0150
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