Samantha is holding a portfolio of two different shares, A and B. She has $14,000 invested...
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Samantha is holding a portfolio of two different shares, A and B. She has $14,000 invested in A and $16,000 invested in B. The following table holds: Share A B Share price $25.00 $40.00 Expected return 15% 21% Standard deviation of returns 30% 41% Correlation coefficient 0.24 Find the expected return and the standard deviation of returns of Samantha's portfolio. Show all workings. [6 marks] (B) Samantha's investment advisor Stuart has advised her to create a minimum variance portfolio and invest her money in Share A and Share B accordingly. She has a total of $30,000 to invest in her portfolio. Calculate the amount Samantha should invest in Share A and Share B to form a minimum variance portfolio. Also calculate the expected return and standard deviation of the resulting portfolio. Show all workings. [6 marks] (C) Assuming Samantha could have invested her money at a risk free rate of 6.5%. Use the Sharpe measure to evaluate if Samantha's portfolio derived in part (B) outperformed the portfolio in part (A). Show all workings. [3 marks] Samantha is holding a portfolio of two different shares, A and B. She has $14,000 invested in A and $16,000 invested in B. The following table holds: Share A B Share price $25.00 $40.00 Expected return 15% 21% Standard deviation of returns 30% 41% Correlation coefficient 0.24 Find the expected return and the standard deviation of returns of Samantha's portfolio. Show all workings. [6 marks] (B) Samantha's investment advisor Stuart has advised her to create a minimum variance portfolio and invest her money in Share A and Share B accordingly. She has a total of $30,000 to invest in her portfolio. Calculate the amount Samantha should invest in Share A and Share B to form a minimum variance portfolio. Also calculate the expected return and standard deviation of the resulting portfolio. Show all workings. [6 marks] (C) Assuming Samantha could have invested her money at a risk free rate of 6.5%. Use the Sharpe measure to evaluate if Samantha's portfolio derived in part (B) outperformed the portfolio in part (A). Show all workings. [3 marks]
Expert Answer:
Answer rating: 100% (QA)
A To find the expected return and standard deviation of Samanthas portfolio we can use the following formulas Expected Return of Portfolio Rp wA Ra wB Rb Standard Deviation of Portfolio p sqrtwA2 A2 w... View the full answer
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