Explore BrainMass

Explore BrainMass

    Assets: Minimum Variance Portfolio; Yield Expected Return

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Questions

    Assume that there are three assets available. A is a risk-free asset with that yields a rate of 8%. The other two assets, B and S are risky asset with the following attributes.

    Asset Expected Return Standard deviation
    A
    B 12% 15%
    S 20% 30%

    Correlation between assets B and S is 0.1.

    Question 1:
    To determine the investment proportions in the minimum-variance portfolio of the two risky assets, the expected value and standard deviation of its rate of return. I did the following : {see attachment}

    Question 2:
    To draw the investment opportunity set of the two risky funds. I used investment proportions for the stock funds of zero to 100% in increments of 20%.
    Tabulate the investment opportunity set of the two risky funds {see attachment}
    Draw the investment opportunity set of the two risky funds {see attachment}

    Question 3:
    If using only risky assets S, and B, to set up portfolio to yield an expected return of 14%, I did the following {see attachment}

    Question 4:
    Using all three assets A, B, and S, how can I set up portfolio to yield an expected return of 14%? What would be the standard deviation this portfolio? What proportion of each asset invested?

    Question 5:
    Assuming the borrowing is not allow, to construct a portfolio of only risky assets S, and B, with an expected return of 24%. What would be appropriated portfolio proportions? Consequently, what are their standard deviations? If the borrowing is allowed at the risk free rate, how much less the standard deviation would be?

    © BrainMass Inc. brainmass.com June 3, 2020, 5:13 pm ad1c9bdddf
    https://brainmass.com/statistics/quantative-analysis-of-data/assets-minimum-variance-portfolio-yield-expected-return-18232

    Attachments

    Solution Summary

    Assets are explained. Minimum variance portfolio and yield expected return is discussed.

    $2.19

    ADVERTISEMENT