Suppose the Lohrmanns can invest in only two risky assets, A and B. The expected...
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Suppose the Lohrmanns can invest in only two risky assets, A and B. The expected retur standard deviation for asset A are 20 percent and 50 percent, and the expected return an standard deviation for asset B are 15 percent and 33 percent. The two assets have zero correlation with one another. Calculate portfolio expected return and portfolio risk (standard deviation) if an investor invests 10 percent in A and the remaining 90 percent in B. State of Economy Bust Boom Probability of State of Economy -40 .60 1.00 Security Returns If State Occurs Roten Bradley 10% 30% 40 10 i. ii. iii. Calculate the expected returns for Roten and Bradley. Calculate the standard deviations for Roten and Bradley. Calculate the expected return on a portfolio of 50 percent Roten and 50 percent Bradley Calculate the portfolio's Volatility of a portfolio of 50 percent Roten and 50 perc Bradley iv
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