In: Accounting
As a potential investor you have three alternatives presented to you in the table below. Your goal is to construct a portfolio of two assets (each with equal weights) chosen from the three alternatives below.
Economic Scenario |
Probability |
Return: A |
Return: B |
Return: Risk Free Asset (RFA) |
Recession |
20% |
5% |
7% |
10% |
Normal |
60% |
15% |
14% |
10% |
Boom |
20% |
25% |
21% |
10% |
A |
B |
|
Expected Return |
15% |
14% |
Variance |
40 |
19.6 |
Covariance of A and B: +28 |
Calculate the coefficient of variation of the following por
Answer to question can be found in the attached images.
please go through it.
Working Note
Calculation of Correlation Coefficient
Calculation of Expected Return pf Portfolio
Working Note to Question C
Calculation of Standard deviation of portfolio
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