QUESTION 1
W_(D,Min)=(s_E^2-Cov(r_E,r_D ))/(s_D^2+s_E^2-2Cov(r_E,r_D ) )=(s_(E )^2-?s ?_E s_D ?_(E,D))/(s_D^2+s_E^2-2s_E s_D ?_(E,D) )
Thus:
Cov_((r_(E,) r_D))=0.2*0.26*0.14=0.00728
w_(D,Min)=(?0.26?^2*0.00728)/(?0.14?^2+?0.26?^2-2*0.26*0.14*0.2)=0.8304=83.04%
W_(E,Min)=1-0.8304=0.1696=16.96%
the expected return and standard deviation of the portfolio will be calculated
Expected return:
E[r_? ]=0.83*9%+0.17*14%=9.848%
Variance:
s_P^2=?0.83?^2*?14%?^2+?0.17?^2 ?*26%?^2+2*0.83*0.17*14%*26%*0.2=0.0175
Standard deviation
s=v(s^2 )=0.1323
E(r_c )=W_P E(r_p )+(1-W_p )E(r_F )
17%=W_P×11.1%+(1-W_p )×5%
W_P=1.967
W_F=1-1.967=-0.967
Place this order with us and get 18% discount now! to earn your discount enter this code: summer17 If you need assistance chat with us now by clicking the live chat button.