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Consider an investor who wishes to invest 40% to defensive investments and 60% allocation to growth...

Consider an investor who wishes to invest 40% to defensive investments and 60% allocation to growth investments. The investor has worked out the forecasted volatility, expected return and correlation between the two types of investments as below:

Investments Volatility Return
Defensive 6% per annum 5% per annum
Growth 18% per annum 11% per annum

The correlation between growth and defensive investments is 0.05

Calculate the proportion of risk allocated to Defensive investments in this portfolio.

Group of answer choices

None of the other answers

6.78%

4.56%

5.65%

7.39%

Solutions

Expert Solution

The answer of the given question is 5.65%

jeff jeffy answered 2 years ago
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