Purchase Solution

# Expected Return and Standard Deviation of Portfolio Caclulations

Not what you're looking for?

3. Consider two securities with expected return of 16% and 20% and standard deviation of 25% and 40%, respectively.
a. If the returns of the two assets are perfectly correlated, create a portfolio with an expected return of 24%. Find the standard deviation of that portfolio.
b. Create a portfolio with a standard deviation of 30%. Compute that portfolio's expected return.
c. With the perfectly positive correlation, create a risk-less portfolio and find the risk free rate.
d. If the two assets are perfectly negative correlated, find the minimum variance portfolio and its expected return.
e. If the two assets are perfectly negatively correlated, find a portfolio with a standard deviation of 15% and compute its return. Verify that is on the efficient frontier.
f. If the correlation between the two assets is zero, create a portfolio with a 19% return and compute the portfolio standard deviation.
g. If the return of the two assets is zero, find the minimum variance portfolio and its expected return.

##### Solution Summary

The solution
a) create a portfolio with an expected return of 24% if the returns of the two assets are perfectly correlated and finds the standard deviation of that portfolio.
b) creates a portfolio with a standard deviation of 30% and compute that portfolio's expected return.
c) With the perfectly positive correlation, creates a risk-less portfolio and find the risk free rate.
d) Finds the minimum variance portfolio and its expected return if the two assets are perfectly negative correlated.
e) Find a portfolio with a standard deviation of 15% and computes its return if the two assets are perfectly negatively correlated.
f) Create a portfolio with a 19% return and computes the portfolio standard deviation if the correlation between the two assets is zero.
g) Finds the minimum variance portfolio and its expected return, if the return of the two assets is zero.

##### Motivation

This tests some key elements of major motivation theories.

##### Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce