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Refer to the table below: 3 Doors, Inc. Down Co. Expected return, E(R) 17 % 8...

Refer to the table below:

3 Doors, Inc. Down Co.
Expected return, E(R) 17 % 8 %
Standard deviation, σ 32 20
Correlation 0.41

Using the information provided on the two stocks in the table above, find the expected return and standard deviation on the minimum variance portfolio. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Expected return %
Standard deviation %

Solutions

Expert Solution

Minimum Variance Port portfolio:

Assume 3 Doors named as A

DOwn as B

Expected Return of Portfolio:

[ Wa * Ra ] + [ Wb * Rb ]

Wa = Weight in 3 door

Wb =Weight in Down CO.

Ra = Return from 3 Door

Rb = Return from Down CO

= [ 0.153 * 17% ] + [ 0.847 * 8% ]

= 2.601% + 6.776%

= 9.38%

Portfolio SD:

jeff jeffy answered 1 year ago
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