Stocks A, B and C have a monthly return and variance of: (10%, 0.0036), (15%, 0.0009) and (3%, 0.036) respectively. The coefficient of correlations are: Coef (A,B) 0.7, Coef (B,C) = 0.8, Coef (A,C) = 0.2 m a. Calculate the Covariances (A,B), (A,C) and (C, A) b. Calculate the weights to invest in each stock in order to have a portfolio with minimum variance with a return expected of 12% c. Calculate the return of the portfolio using the weights found in (B) d. Calculate the variance for this portfolio
Stocks A, B and C have a monthly return and variance of: (10%, 0.0036), (15%, 0.0009) and (3%, 0.036) respectively. The coefficient of correlations are: Coef (A,B) 0.7, Coef (B,C) = 0.8, Coef (A,C) = 0.2 m a. Calculate the Covariances (A,B), (A,C) and (C, A) b. Calculate the weights to invest in each stock in order to have a portfolio with minimum variance with a return expected of 12% c. Calculate the return of the portfolio using the weights found in (B) d. Calculate the variance for this portfolio
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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Stocks A, B and C have a monthly return and variance of: (10%, 0.0036),
(15%, 0.0009) and (3%, 0.036) respectively. The coefficient of correlations are: Coef
(A,B) 0.7, Coef (B,C) = 0.8, Coef (A,C) = 0.2
a. Calculate the Covariances (A,B), (A,C) and (C, A)
b. Calculate the weights to invest in each stock in order to have a portfolio with minimum
variance with a return expected of 12%
c. Calculate the return of the portfolio using the weights found in (B)
d. Calculate the variance for this portfolio
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