Angela’s portfolio holds security A, which returned 12.0%, security B, which returned 15.0% and security C, which returned -5.0%. At the beginning of the year 45% was invested in security A, 25.0% in...


Angela’s portfolio holds security   A, which returned 12.0%, security   B, which returned


15.0% and security   C, which returned -5.0%.   At the beginning of the year 45% was invested in security A, 25.0% in security B and the remaining 30% was invested in security C. The correlation between AB is 0.75, between AC 0.35, and between BC -0.5. Securities A's standard deviation is 12%, security B's standard deviations is 15% and security C's is 10%.



Required: Calculate the:



a)
Expected return and Portfolio variance of Angela's Portfolio


b) Portfolio Standard deviation of What happens to the portfolio risk if market conditions reduce the risk of security B by 50%?



Jun 08, 2022
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