Expected returns and portfolio variance

Reference no: EM1311327

Expected returns and portfolio variance:

You are considering investing in two securities, X and Y. The following data are available for the two securities:

	Security X	Security Y
Expected Return	0.10	0.07
Standard deviation of returns	0.08	0.04
Beta	1.10	0.75

A. What happens to the expected return and standard deviation of returns of the portfolio in part a if 70 percent of your funds are invested in Security X and 30 percent of your funds are invested in Security Y?

B. What happens to the expected return and standard deviation of returns of the portfolio in Part a if the following conditions exist?

i) The correlation of returns between Securities X and Y is +1.0.

ii) The correlation of returns between Securities X and Y is 0.

iii) The correlation of returns between Securities X and Y is -0.7.

Reference no: EM1311327

Questions Cloud

Repeal some of tax breaks to business : Assume the new leadership in Congress decides to repeal some of the tax breaks granted to large businesses throughout the past several years. What impact will the repeal have on the exporting of jobs to foreign countries? describe by using isoquant ..

Cash flow computations : Finding the Net cash flow provided (used) by investing activities - Cash Flow Computations and From the following selected data, compute

Essay on analyzing a work of art : Analyzing a work of art .Select an image of an existing art form that caputures the story and the aspect of the analysis we have chose

Find the net cash flow provided by operating activities : Finding the Net cash flow provided by operating activities

Expected returns and portfolio variance : What happens to the expected return and standard deviation of returns of the portfolio in Part a if the following conditions exist?

Calculate the maximum and minimum values of the output : The liquid level system shown in the below figure is initially at the steady state with the inlet flow rate at 1 cfm. Calculate the maximum & minimum values of the output.

Purpose an income statement for the year : Purpose an income statement for the year - Prepare an income statement for the year ended December 31, 2006. (Assume that 7,500 shares of stock are outstanding.

Equilibrium wage for plumbers in factor market : You're the absolute czar and head of union of 1,000 plumbers in Austin, Texas. You've the absolute power to set the wage at which the plumbers will work. You wished to achieve full employment at highest possible wage; (b) you wished to maximize the..

Normal distribution-business problem : A normal distribution with a mean of 55 and a standard deviation of 6 is evaluated to solve a business problem.

User Account

All Pages