Performance Evaluation and Risk Management: deviation, probabilities, allocation
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Please assist me with the four questions in the attached word doc (same questions as body of the posting)
2. Standard Deviation - A portfolio has an annual variance of .0420. What is the standard deviation of a two month period?
8. Normal Probabilities The probabilities that a normal random variable X is less than various values of x are 5%, 2.5%, and 1%..What are these values of x?
15. Asset Allocation Fill in the missing information assuming a correlation of -.20.
Portfolio Weights Expected Standard
Stocks Bonds Return Deviation
1.00 0.00 13% 22%
0.80 0.20
0.60 0.40
0.40 0.60
0.20 0.80
0.00 1.00 6% 9%
22. Value-at-Risk (VaR) Statistic Your portfolio allocates equal amounts to three stocks. All three stocks have the same mean annual return of 18%. Annual return standard deviations for these three stocks are 35%, 45%, and 55%. The return correlations among all three stocks are zero. What is the smallest expected loss for your portfolio in the coming year with a probability of 1 percent?
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Solution Summary
The solutions provide the formulas used to calculate the answers to the questions.
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