You can invest in two shares, X and Y. You expect a return of 16% on...

You can invest in two shares, X and Y. You expect a return of 16% on X and 10% on Y. The standard deviation of returns is 20% on X and 9% on Y. The correlation between the returns () is .2.

a) compute the expected return and standard deviation of the following portfolios:

Portfolio % in X % in Y 110
2 .75 .25
3 .5 .5

4 .25 .75 501

b) sketch the set of portfolios composed of X and Y
c) If you can borrow or lend at 3%, sketch the line from the risk-free rate

tangent to the above curve.

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jeff jeffy answered 1 year ago

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