Question;Risk and ReturnSuppose you purchased $1,000 of Stock A with your own money. You then borrowed $500 and used this money to buy Stock B.This means that the portfolio weights are as follows: wA = 1000/1000 = 1.00, wB = 500/1000 = 0.50, wC = -500/1000 = -0.50. The correlation coefficient between A and B is 0.70, interest rate on the risk-free asset (Security C) is 5%, variance of Stock A is 0.25, variance of Stock B is 0.49, expected return on Stock A is 10% and Stock B is 16%. Risk and Return.Calculate the variance of a portfolio of the three securities.
Paper#51467 | Written in 18-Jul-2015Price : $22