1. What is the standard deviation of returns on the following two asset portfolio?:Asset A...
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1. What is the standard deviation of returns on the following two asset portfolio?:Asset A - weighting of 30% of value of portfolio - std dev. of returns 20%. Asset B -weighting of 70% of value of portfolio - std dev. of returns 25%. Correlation between Asset A & Asset B of 0.2
A. 19.6%
B. 21.2%
C. 22.7%
D. 27.3%
2. After extensive research, you believe the probability distribution for next year's return on FB Inc is:
Return
Probability
10.5%
0.2
3.2%
0.3
-5.2%
0.3
13.2%
0.2
Compute the standard deviation of this return. Express your answer as a percentage to three decimal places.
3.
Suppose that the risk-free rate is 5% and the market portfolio has an expected return of 13% with a volatility of 18%. Monsters Inc. has a 24% volatility and a correlation with the market of .60, while California Gold Mining has a 32% volatility and a correlation with the market of -.7. Assume the CAPM assumptions hold.
California Gold Mining's required return is closest to:
A.
15%
B.
-5%
C.
5%
D.
13%
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