Expected. Standard. Correlation

Asset Return. Deviation. Coefficient

X. 5.0%. 15%. -0.5

Y. 14.0%. 40%

Portfolio components Portfolio characteristics

Weight of x Weight of Y. Expected return. Standard deviation

A 100%. 0% 5 %. 15%

B 90%. 10%. 5.9%. 12%

C 80%. 20%. 6.8%. 10.6%

D 70%. 30%. 7.7%. 11.3%

E 60%. 40%. 8.6%. 13.9%

F 50%. 50%. 9.5%. 17.5%

G 40%. 60%. 10.4%. 21.6%

H 30%. 70%. 11.3%. 26%

I 20%. 80%. 12.2%. 30.6%

J 10%. 90%. 13.1%. 35.3 %

K 0%. 100%. 14 %. 40%

a) Plot the portfolios on a graph (SD on x-axis & ER on y-axis) and label: (1 mark) I. Minimum variance portfolio (MVP) (1 mark)

II. Inefficient portfolios (1 mark) III. Efficient Portfolios. (1 mark)

b) As a risk averse investor (want to minimize risk), which portfolio(s) would you choose? Briefly explain. (2 marks)

c) As an investor who is prepared to take on more risk (more tolerance for risk), which portfolio(s) would you choose? Briefly explain. (2 marks)

the letters dont have any valuable meaning they just differentiate between the different variables

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