Week 5 review questions
金融市场经济学作业代写 Consider a two asset portfolio.The overall portfolio return is 10%.The expected return on asset 2 is 7%.If 30% of the portfolio
Consider a two asset portfolio.
The overall portfolio return is 10%.
The expected return on asset 2 is 7%.
If 30% of the portfolio is invested in asset 1 and 70% in asset 2, what is the expected return of asset 1?
For the assets in Q1, now also assume that the variance of Asset 1 is 3% and variance for Asset 2 is 2%.
Plot the two assets in expected return and standard deviation space.
Let the correlation coefficient between Assets 1 and 2 equal +1. Draw the efficiency frontier on the same graph as Q2.
Now assume the correlation coefficient takes on a value less than 1. What is the shape of the frontier?
Assume now there is a risk free asset with a realised return of 5%. What is the expected return and standard deviation of this asset?
Calculate the Sharpe ratios of Assets 1 and 2
Consider the following diagram
Identify the efficient set of portfolios.
Explain by reference to the second mutual fund theorem, how portfolio O might be comprised?
Do you agree that Portfolios O and Z have the same Sharpe ratio? Explain why.
Why is Portfolio O ‘preferred’ to Z by the investor?