Consider a portfolio investment consisting of 40% invested in MTN, 60% invested in Multichoice Additional information:...

Consider a portfolio investment consisting of 40% invested in MTN, 60% invested in Multichoice
Additional information:
Expected return:
MTN : -0,001986441
Multichoice: 0,003255932

3.1 Calculate the expected return of the portfolio
3.2 Calculate the covariance of the portfolio
3.3 Calculate the variance of the portfolio and standard deviation of the portfolio
3.4 Given that the risk free rate is 0.0002. Calculate the Sharpe ratio for the portfolio
3.5 Interpret the Sharpe ratio calculated in 3.4

Expert Solution

3.1 The expected return of the portfolio is the average of the return of the constituent securities weighted as per their proportion in the portfolio. So in this case the expected return is = Return of MTN*Weight of MTN + Return of Multichoice*weight of multichoice = -0.001986441*0.4+0.003255932*0.6 = 0.001158 Answer

3.2 Covariance is defined for a portfolio ABC as below:

Average return in this case is the return calculated in 3.1 and sample size is 2.

So covariance is = (-0.001986441-0.001158)*(0.003255932-0.001158) / (2-1) = -0.000006595 Answer

3.3 First calculate the correlation of the portfolio and that will help you calculate the variance of the portfolio

for this calculation is required variance and standard deviation of of each portfolio so plz provide detail and reupload remaining questions. thank you...

orchestra answered 1 year ago

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