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In: Finance

Calculate E(rxy) for (50%X + 50%Y) portfolio E(rxz) for (50%X + 50%Z) portfolio from the following...

Calculate E(r_xy) for (50%X + 50%Y) portfolio E(r_xz) for (50%X + 50%Z) portfolio from the following data:

E(r_xy) E(r_xz)

(50%X + 50%Y) (50%X + 50%Z)

Yr (t) E(r_x) E(r_y) E(r_z)

2012 8.0 24.0 8.0

2013 10.0 20.0 12.0

2014 12.0 16.0 16.0

2015 14.0 12.0 20.0

2016 16.0 8.0 24.0

Expert Solution

Yr (t)	E(rx)	E(ry)	E(rz)
2012	8	24	8
2013	10	20	12
2014	12	16	16
2015	14	12	20
2016	16	8	24

E(Rxy) with 50% X and 50% in Y

Weight of X in the portfolio = W_X = 0.5, Weight of Y in the portfolio = W_Y = 0.5

In 2012

E(Rxy) = W_X*E[R_X] + W_Y*E[R_Y] = 0.5*8 + 0.5*24 = 16%

In 2013

E(Rxy) = W_X*E[R_X] + W_Y*E[R_Y] = 0.5*10 + 0.5*20 = 15%

In 2014

E(Rxy) = W_X*E[R_X] + W_Y*E[R_Y] = 0.5*12 + 0.5*16 = 14%

In 2015

E(Rxy) = W_X*E[R_X] + W_Y*E[R_Y] = 0.5*14 + 0.5*12 = 13%

In 2016

E(Rxy) = W_X*E[R_X] + W_Y*E[R_Y] = 0.5*16 + 0.5*8 = 12%

E(Rxz) with 50% X and 50% in Z

Weight of X in the portfolio = W_X = 0.5, Weight of Z in the portfolio = W_Z = 0.5

In 2012

E(Rxz) = W_X*E[R_X] + W_Z*E[R_Z] = 0.5*8 + 0.5*8 = 8%

In 2013

E(Rxz) = W_X*E[R_X] + W_Z*E[R_Z] = 0.5*10 + 0.5*12 = 11%

In 2014

E(Rxz) = W_X*E[R_X] + W_Z*E[R_Z] = 0.5*12 + 0.5*16 = 14%

In 2015

E(Rxz) = W_X*E[R_X] + W_Z*E[R_Z] = 0.5*14 + 0.5*20 = 17%

In 2016

E(Rxz) = W_X*E[R_X] + W_Z*E[R_Z] = 0.5*16 + 0.5*24 = 20%

Answer

Yr (t)	E(rx)	E(ry)	E(rz)	E(rxy)	E(rxz)
2012	8	24	8	16	8
2013	10	20	12	15	11
2014	12	16	16	14	14
2015	14	12	20	13	17
2016	16	8	24	12	20

jeff jeffy answered 1 year ago

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