In: Finance
Three securities have the following expected returns and
beta:
Securities | Return | Beta |
A | 10% | 0.65 |
B | 18% | 1.37 |
C | 25% | 0.22 |
a) Calculate the expected return of a portfolio if all the
securities are held equally.
b) Given the standard deviation for the securities A, B, and C is
12%, 14% and 18% while its covariance is 60, 20, and -30
respectively, estimate the standard deviation of this
portfolio.
c) Based on the risk-return relation, redesign the securities
holding proportion in the manner that it rebalances the portfolio
risk to maximize its return.