Question
In: Finance
You are going to invest in Asset J and Asset S. Asset J has an expected...
You are going to invest in Asset J and Asset S. Asset J has an expected return of 11.2 percent and a standard deviation of 52.2 percent. Asset S has an expected return of 8.2 percent and a standard deviation of 17.2 percent. The correlation between the two assets is .50. What are the standard deviation and expected return of the minimum variance portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Solutions
Expert Solution
wj=((17.2%)^2-0.50*52.2%*17.2%)/((52.2%)^2+(17.2%)^2-2*0.50*52.2%*17.2%)=-0.07211
Expected returns=(-0.07211)*11.2%+(1-(-0.07211))*8.2%=7.98367%
Standard
deviation=sqrt((-0.07211)*(52.2%)^2+((1-(-0.07211))*17.2%)^2+2*(-0.07211)*(1-(-0.07211))*52.2%*17.2%*0.5)=8.61054%
jeff jeffy answered 2 years agoRelated Solutions
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