Assume you wish to evaluate the risk and return behaviors associated with various combinations of assets...

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Finance

Assume you wish to evaluate the risk and return behaviorsassociated with various combinations of assets V and W under threeassumed degrees of? correlation: perfect? positive, uncorrelated,and perfect negative. The following average return and risk valueswere calculated for these? assets:
Asset   Average Return, {r}}   Risk (StandardDeviation), s
V   7.6%   4.7%
W   13.2%   9.4%

a. If the returns of assets V and W are perfectly positivelycorrelated? (correlation coefficient equals plus 1 ?), describe therange of? (1) return and? (2) risk associated with all possibleportfolio combinations.
?(1) Range of expected? return: between % and % ?(Round to onedecimal? place.)
?(2) Range of the? risk: between % and % ?(Round to one decimal?place.)

b. If the returns of assets V and W are uncorrelated? (correlationcoefficient equals 0 ?), describe the approximate range of ?(1?)return and? (2) risk associated with all possible portfoliocombinations.
?(1) Range of expected? return: between % and % ?(Round to onedecimal? place.)
?(2) Range of the? risk: between % and % ?(Round to one decimal?place.)

c. If the returns of assets V and W are perfectly negativelycorrelated? (correlation coefficient equals negative 1 ?), describethe range of? (1) return and? (2) risk associated with all possibleportfolio combinations.
?(1) Range of expected? return: between % and % ?(Round to onedecimal? place.)
?(2) Range of the? risk: between % and % ?(Round to one decimal?place.)

Answer & Explanation Solved by verified expert

3.9 Ratings (538 Votes)

As per your question you are asked to calculate return andstandard deviation of each of the given portfolios separatelywhich are formed by different combination of Asset V and AssetWReturnW1R1W2R2Standard deviation ReturnStandard DeviationAsset V760470Asset V1320940Aperfectly positively correlated correlation 1Bperfectly uncorrelatedcorrelation 0Cperfectly negatively correlated correlation 1Situation in See Answer

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Assume you wish to evaluate the risk and return behaviorsassociated with various combinations of assets V and W under threeassumed degrees of? correlation: perfect? positive, uncorrelated,and perfect negative. The following average return and risk valueswere calculated for these? assets:Asset Average Return, {r}} Risk (StandardDeviation), sV 7.6% 4.7%W 13.2% 9.4%a. If the returns of assets V and W are perfectly positivelycorrelated? (correlation coefficient equals plus 1 ?), describe therange of? (1) return and? (2) risk associated with all possibleportfolio combinations.?(1) Range of expected? return: between % and % ?(Round to onedecimal? place.)?(2) Range of the? risk: between % and % ?(Round to one decimal?place.)b. If the returns of assets V and W are uncorrelated? (correlationcoefficient equals 0 ?), describe the approximate range of ?(1?)return and? (2) risk associated with all possible portfoliocombinations.?(1) Range of expected? return: between % and % ?(Round to onedecimal? place.)?(2) Range of the? risk: between % and % ?(Round to one decimal?place.)c. If the returns of assets V and W are perfectly negativelycorrelated? (correlation coefficient equals negative 1 ?), describethe range of? (1) return and? (2) risk associated with all possibleportfolio combinations.?(1) Range of expected? return: between % and % ?(Round to onedecimal? place.)?(2) Range of the? risk: between % and % ?(Round to one decimal?place.)