Reference no: EM131302106
Consider two assets with expected return E(r1)=0.3, E(r2)=0.6; with variances σ12=0.1, σ22=0.25 and covariance σ12=0.15 .
You create two portfolios of the two assets as follows:
Portfolio A with weight vector WA =(0.3, 0.7);
Portfolio B with weight vector WB =(1.2, -0.2).
(Keep all your answers except (d) to 4 decimal places.)
(a) Find the expected rate of return of Portfolio A; ___________
(b) Find the standard deviation of the rate of return of Portfolio A; ___________
(c) Find the covariance between the rate of return of Portfolio A and that of Portfolio B. ___________
(d) Can you find another portfolio whose rate of return is uncorrelated with that of Portfolio A? (keyin 'Y' for Yes, 'N' for No.) ____
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