Consider the data in the table below, which relates to Securities 1, 2 and 3.
You are given that:
the expected return and standard deviation of the market return are 10 and 5
the returns of each security can be modelled using an appropriate single-index
(a) the expected return and standard deviation of return for each security
(b) the covariance of returns between each pair of securities.
the variance of the portfolio
the systematic risk of the portfolio
the specific risk of the portfolio.
Consider a portfolio which consists of Securities 1, 2 and 3 in equal proportions.
Answer rating: 100% (QA)
To calculate the expected return and standard deviation of return for each security you can use the single index model which relates the security s reView the full answer