Problem 1 Suppose the expected retum for assets a and b are as follows: Asset Expected Return (K) 40
Problem 1 Suppose the expected retum for assets a and b are as follows: Asset Expected Return (K) 40% Total Risk (o) 30% 20% 20% Suppose further that the assets are totally uncorrelated (ie, p1,2 =0), and that the risk-free rate is 5 percent (45 points). Compute the weights for the efficient combination of the two risky assets alone (10 Points). a. b. Compute the expected return for the efficient combination of the two risky assets alone. c. Compute the standard deviation for the efficient combination of the two risky assets alone. Footer d. Suppose you wished to have an expected return of 20 percent. (20 Points) 1. Compute the weights for the three assets that would produce this return for the minimum risk. (10 Points) Header
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