You have won a 1 million prize with the National Lottery ticket you bought last week...

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You have won a £1 million prize with the National Lottery ticket you bought last week and you want to invest the money. You are considering investment opportunities from a commercial bank. It offers investment opportunities in two assets: ExMobil and Coca- Cola. ExMobil offers an expected return of 10 percent and Coca-Cola offers an expected return of 15 percent. The standard deviation of returns is 18.2 percent for ExMobil and 27.3 percent for Coca-Cola. The correlation between the returns of ExxonMobil and Coca-Cola has been about 0.4. If you are free to choose how to split your money between ExMobil and Coca-Cola, what is the minimum risk you can achieve? You have won a £1 million prize with the National Lottery ticket you bought last week and you want to invest the money. You are considering investment opportunities from a commercial bank. It offers investment opportunities in two assets: ExMobil and Coca- Cola. ExMobil offers an expected return of 10 percent and Coca-Cola offers an expected return of 15 percent. The standard deviation of returns is 18.2 percent for ExMobil and 27.3 percent for Coca-Cola. The correlation between the returns of ExxonMobil and Coca-Cola has been about 0.4. If you are free to choose how to split your money between ExMobil and Coca-Cola, what is the minimum risk you can achieve?

Answer rating: 100% (QA)

To determine the minimum risk for the investment portfolio we need to calculate the portfolio standa... View the full answer