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This solution assess the return of the portfolio.

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1. Kagera Company has made a portfolio of these three securities:
Cost E(R) σ (R)
Treasury Bond $100,000 6% 0
Kasai Corporation $80,000 15% 30%
Limpopo Company $70,000 16% 25%

The correlation between Kasai and Limpopo is .6. If the returns are normally distributed, find the probability that the return of the portfolio is more then 15%.
Answer 41.17
Cost Weight
Treasury Bond $100,000 40%
Kasai Corporation $80,000 32%
Limpopo Company $70,000 28%

Expected return on portfolio= Swiri = (40%*6%+32%*15%+28%*16%)
=11.68%
Portfolio standard deviation = (wt^2* σt^2+ wl^2* σl^2+ 2*wt*wl*σt* σl*rtl)^0.5
Since ...

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