An investor wants to design a complete portfolio with an expected rate of return of 15% from two risky and one risk-free assets. The first risky asset has an expected return of 13% and a standard deviation of return of 20%. The second risky asset has an expected return of 7% and a standard deviation of return of 5%. The correlation coefficient between the returns of the two risky assets is 0.40. The risk-free rate of return is 1%. What is the allocation of the investor’s money across these three assets?

An investor wants to design a complete portfolio with an expected rate of return of 15% from two risky and one risk-free assets. The first risky asset has an expected return of 13% and a standard deviation of return of 20%. The second risky asset has an expected return of 7% and a standard deviation of return of 5%. The correlation coefficient between the returns of the two risky assets is 0.40. The risk-free rate of return is 1%. What is the allocation of the investor’s money across these three assets?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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