Return and Risk for Portfolio Assignment | Homework For You
January 30th, 2020
Probability distribution for the one year holding-period return of two stocks. Assume that risk-free rate is 1% and the correlation between A and B is 0.8.
|State of Economy||Probability||Return Stock A||Return Stock B|
U = E(r) – 0.5As2
- Find the expected returns and standard deviation for each stock.
- Assume 14% in Stock A and 86% in Stock B is the optimal weights for a portfolio P based on these two risky stocks, what is the return and risk for portfolio P?
- Assume that the client with risk aversion of 6 wants to allocate his money on risk-free asset and on the risky portfolio P. How should the client allocate the money between the risky portfolio P and the risk-free rate?
- What is the expected rate of return and risk on a complete portfolio C that includes risk-free and a portfolio P? Get Finance homework help today