You have just been appointed as a fund manager for Gate Way Fund, of which you will be responsible of a portfolio that consists of two assets. The analysts have provided you with the expected returns and standard deviations of returns of which are listed in the table below: Asset A Asset B Expected Return 7% 11% Standard Deviation 15% 21% Calculate the standard deviation of the portfolio if the assets are equally weighted.
You have just been appointed as a fund manager for Gate Way Fund, of which you will be responsible of a portfolio that consists of two assets. The analysts have provided you with the expected returns and standard deviations of returns of which are listed in the table below: Asset A Asset B Expected Return 7% 11% Standard Deviation 15% 21% Calculate the standard deviation of the portfolio if the assets are equally weighted.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You have just been appointed as a fund manager for Gate Way Fund, of which you will be responsible of a portfolio that consists of two assets. The analysts have provided you with the expected returns and standard deviations of returns of which are listed in the table below:
|
|
Asset A |
Asset B |
|
Expected Return |
7% |
11% |
|
Standard Deviation |
15% |
21% |
- Calculate the standard deviation of the portfolio if the assets are equally weighted.
- The two asset portfolio model can be extended two a portfolio with more assets. Explain the implications of this approach for the understanding of portfolio risk and discuss the practical problems of applying the model in this fashion.
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