Solution-Possible combinations between s and b

Possible combinations between s and b

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Reference no: EM133056572

You are interested in making investment in S and B. The risk-free rate of return is 6% and the market risk premium is 7%. The expected return of S is 25%, the expected return of B is 20%. The standard deviation of S is 9.22% and the standard deviation of B is 5%

States	Probabilities	S	B
1	0.4	25%	15%
2	0.3	35%	20%
3	0.2	15%	25%
4	0.1	15%	30%

Required: ( don't used excel, show step please and formula )

Compute and analyze the correlation between S and B round your answer to 2 decimals allocate to S and B?
Compute the expected return and risk of the minimum variance portfolio
How do you call the curve representing all the possible combinations between S and B?
Explain with you own words how to draw this graph? If you would like to create the optimal portfolio.
Explain with your own words how to find out graphically the optimal portfolio
Compute how much weight you will allocate to S and B in the optimal portfolio
Compute the expected return and risk of the optimal portfolio (2 Marks) The beta of the stock S is 0.5 while the beta of the stock B is 2:
Indicate for each stock S and B whether it's overpriced, underpriced or fairly priced and explain the reason

Reference no: EM133056572

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Possible combinations between s and b

Reference no: EM133056572

Reference no: EM133056572

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