The following data apply to Computational Problems 71 through 74. Assume expected returns and standard deviations as follows:

EG&G Return (%) 25

Standard deviation (%) 30 Covariance 112.5 The correlation coefficient,

, is 0.15. GF 23 25

EG&G wi 1.0 0.8 0.6 0.2 0.0

GF wj = (1 wi) 0.0 0.2 0.4 0.8 1.0

(1) Portfolio Expected Returns (%) 25.0 24.6 24.2 23.4 23.0

(2) Variance 900 637 478 472 625

(3) Standard Deviation (%) 30.0 25.2 21.9 21.7 25.0

71 Confirm the expected portfolio returns in column 1.

72 Confirm the expected portfolio variances in column 2.

73 Confirm the expected standard deviations in column 3

. 74 On the basis of these data, determine the lowest risk portfolio.

75 Assume that the riskfree rate is 7 percent, the estimated return on the market is 12 percent, and the standard deviation of the markets expected return is 21 percent. Calculate the expected return and risk (standard deviation) for the following portfolios:

a. 60 percent of investable wealth in riskless assets, 40 percent in the market portfolio

b. 150 percent of investable wealth in the market portfolio

c. 100 percent of investable wealth in the market portfolio