Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. question 4 10 pts consider a risky portfolio (p) c

Question 4 10 pts Consider a risky portfolio (P) comprised of two assets: A bond...

50.1K

Verified Solution

Question

Finance

image
Question 4 10 pts Consider a risky portfolio (P) comprised of two assets: A bond fund (B) and a stock fund (S). According to portfolio theory, the variance of such portfolio will depend on the weight of each asset in the portfolio, the standard deviation of each asset in the portfolio, and the correlation between these two assets as given by the formula: 0.-(02 +(ws.s? +2.(wg:0p) (Wg09) P8.5. Based on this formula, the minimum variance portfolio will have the following weight we in the bond fund: os-00 Pas wy 0+0,-2.0, Os Pas Therefore, when bond lund (B) and the stock fund (S) are perfectly correlated fie correlation-1), the weight in the stock fund (S) in the minimum variance portfolio will be

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students