Consider the following data for assets A and B: $\bar { R } _ { \mathrm { A } } = 10 \%$ ; $\bar { R } _ { B } = 19 \%$ ; $\sigma _ { \mathrm { A } } = 3 \%$ ; $\sigma _ { B } = 5 \%$ ; $\beta _ { \mathrm { A } } = 0.6$ ; $\beta _ { B } = 1.4$ ; $\rho _ { A B } = 0.4$ .
a. Calculate the expected return, variance, and beta of a portfolio constructed by investing 1/3 of your funds in asset A and 2/3 in asset B.
b. If only the riskless asset and assets A and B are available, find the optimum risky-asset portfolio if the risk-free rate is 8%.

Question

Consider the following data for assets A and B: $\bar { R } _ { \mathrm { A } } = 10 \%$ ; $\bar { R } _ { B } = 19 \%$ ; $\sigma _ { \mathrm { A } } = 3 \%$ ; $\sigma _ { B } = 5 \%$ ; $\beta _ { \mathrm { A } } = 0.6$ ; $\beta _ { B } = 1.4$ ; $\rho _ { A B } = 0.4$ . 
a. Calculate the expected return, variance, and beta of a portfolio constructed by investing 1/3 of your funds in asset A and 2/3 in asset B.
b. If only the riskless asset and assets A and B are available, find the optimum risky-asset portfolio if the risk-free rate is 8%.

Quizplus · Accepted Answer

The Answer of Consider the following data for assets A and B: $\bar { R } _ { \mathrm { A } } = 10 \%$ ; $\bar { R } _ { B } = 19 \%$ ; $\sigma _ { \mathrm { A } } = 3 \%$ ; $\sigma _ { B } = 5 \%$ ; $\beta _ { \mathrm { A } } = 0.6$ ; $\beta _ { B } = 1.4$ ; $\rho _ { A B } = 0.4$ . 
a. Calculate the expected return, variance, and beta of a portfolio constructed by investing 1/3 of your funds in asset A and 2/3 in asset B.
b. If only the riskless asset and assets A and B are available, find the optimum risky-asset portfolio if the risk-free rate is 8%.

Consider the Following Data for Assets a and B RˉA=10%\bar { R } _ { \mathrm { A } } = 10 \%RˉA​=10%

Consider the Following Data for Assets a and B $\bar { R } _ { \mathrm { A } } = 10 \%$