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Portfolio analysis:

You can invest in two funds A and B with the following characteristics:
Fund E(R) Beta
A 12% 0.90
B 18% 1.50
The riskfree return is 5%. The market risk premium is 8%. The standard deviation of the market return is 20%. The two funds have no non-systematic risk. (Show your work)

1) What is the alpha of the two funds?

2) What is the standard deviation of the two funds?

3) What is the correlation of the two funds?

see attached file.

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Please see attached file
You can invest in two funds A and B with the following characteristics:
Fund E(R) Beta
A 12% 0.9
B 18% 1.5

The riskfree return is 5%. The market risk premium is 8%. The standard deviation of the market return is 20%. The two funds have no non-systematic risk. (Show your work)

1) What is the alpha of the two funds?
Alpha is the difference in return between actual return- required return as ...

Solution Summary

Calculates alpha, standard deviation and correlation of two funds.

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