Pepsi’s mean return over the last 5 years is 19% while McDonald’s is 14%. Their respective...

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Finance

Pepsi’s mean return over the last 5 years is 19% whileMcDonald’s is 14%. Their respective standard deviations are 21% and18%. The two stocks correlation coefficient is -.20.
Calculate the portfolio mean return for the minimum varianceportfolio.
Calculate the portfolio risk for the minimum varianceportfolio.
Discuss the benefits of diversification for Pepsi andMcDonald’s.

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aThe formula to calculate Mean expectedreturn of minimum variance porfolio is1whereErPMean return of Pepsiwpweight of pepsiErMMean return of McDonaldswMweight of See Answer

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Pepsi’s mean return over the last 5 years is 19% whileMcDonald’s is 14%. Their respective standard deviations are 21% and18%. The two stocks correlation coefficient is -.20.Calculate the portfolio mean return for the minimum varianceportfolio.Calculate the portfolio risk for the minimum varianceportfolio.Discuss the benefits of diversification for Pepsi andMcDonald’s.