You have RO 100,000 to invest it in five risky assets (1, 2, 3, 4, and...

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You have RO 100,000 to invest it in five risky assets (1, 2, 3, 4, and 5). Share 1 Share 3 12% 18% 25% 30% Share 2 15% 27% The correlation coefficient between shares are as follows Expected returns Standard deviation Share 4 20% 35% P1.2 0.5; P1.3 -0.5; P1,4 -0.6; P1,5 -0.65; P2,3 -0.55; P2.4 -0.45; P2,5 -0.35; P3.4 0.1; P4,5 -0.8; The risk free rate is 6%. The market portfolio has expected return of 12%. Share 5 25% 40% =0.7; P3,5 1) You borrow RO 20,000 and you invest RO 20,000 in Share 1, RO 10,000 in Share 2, RO 15,000 in Share 3, RO 35,000 in Share 4, and RO 40,000 in Share 5. What is the mean and the risk of your portfolio M? (3 marks) You have RO 100,000 to invest it in five risky assets (1, 2, 3, 4, and 5). Share 1 Share 3 12% 18% 25% 30% Share 2 15% 27% The correlation coefficient between shares are as follows Expected returns Standard deviation Share 4 20% 35% P1.2 0.5; P1.3 -0.5; P1,4 -0.6; P1,5 -0.65; P2,3 -0.55; P2.4 -0.45; P2,5 -0.35; P3.4 0.1; P4,5 -0.8; The risk free rate is 6%. The market portfolio has expected return of 12%. Share 5 25% 40% =0.7; P3,5 1) You borrow RO 20,000 and you invest RO 20,000 in Share 1, RO 10,000 in Share 2, RO 15,000 in Share 3, RO 35,000 in Share 4, and RO 40,000 in Share 5. What is the mean and the risk of your portfolio M? (3 marks)

Answer rating: 100% (QA)

SOLUTION To calculate the mean and risk of the portfolio we first need to calculate the expected return and standard deviation of the portfolio The expected return of the portfolio is calculated as fo... View the full answer