HOMEWORK ASSIGNMENT\

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\ Risk & Return (chapters 2 & 3)\ You have the following information regarding rates of return for two stocks, B and C:\ Probability

( Rate of Return (/%) )/( Stock C)14.5,6

0.3\ 0.3

Stock B Stock C\ 5,30

\ Suppose you want to construct the following portfolios with stocks B & C:\ \\\\table[[Portfolio,,],[1,

Wb

,

Wc

You have the following information regarding rates of return for two stocks, B and C : Probability Rate of Return (\%) 14.56 (25)=16.5% Suppose you want to construct the following portfolios with stocks B \& C: \begin{tabular}{llll} Portfolio & Wb & Wc & Expec \\ 1 & 0.0 & 1.0 & \\ 2 & 0.1 & 0.9 & \\ 3 & 0.2 & 0.8 \\ 4 & 0.3 & 0.7 \\ 5 & 0.4 & 0.6 \\ 6 & 0.5 & 0.5 \\ 7 & 0.6 & 0.4 \\ 8 & 0.7 & 0.3 \\ 9 & 0.8 & 0.2 \\ 10 & 0.9 & 0.1 \\ 11 & 1.0 & 0.0 \end{tabular} Portfolio Standard deviation * Portfolio \#2 consists of stocks B and C. The weight of stock B (Wb) in your portfolio is 10% and the weight of stock C (Wc) is 90%. Similarly, portfolio \#8 consists of stocks B and C. The weight of stock B (Wb) in your portfolio is 70% and the weight of stock C (Wc) is 30%. 1. Calculate the expected rate of return and the risk (standard deviation) of each of the above 11 portfolios. Suppose you want to construct the minimum-risk (minimum-variance) portfolio with stocks B \& C. alculate the expected rate of return and the risk (standard deviation) of the minimum-risk portfolio