Calculate the risk and return of the overall portfolio

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Reference no: EM1373000

Share A is relatively risky with a variance of 0,18. It has a covariance of 0.018 with B, which has a variance of 0,047. B has a covariance with C, of 0,04. C has a standard deviation of 0,56. A and C have a correlation coefficient of 0,387.

You propose the following portfolio: 20% in A, 25% in B, 30% in C and 25 percent in government securities invested at the risk free rate. Suppose rate of return on A is 17%, B is 8 percent, C is 12%, risk free is 5 percent.

1. Calculate the risk (standard deviation) and return of the overall portfolio.
2. Calculate the covariance and correlation coefficient between the risky portfolio in part 1.and a portfolio with the following proportions: A=0,4 B=0,3 and C=0,3

 

Reference no: EM1373000

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