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Asset A has an expected return of 10% and standard deviation of 20%. Asset B has an expect

Asset A has an expected return of 10% and standard deviation of 20%. Asset B has an expect

Asset A has an expected return of 10% and standard deviation of 20%. Asset B has an expected return of 16% and a standard deviaiton of 40%. The correlation between A and B is 0.35. Portfolio C is composed of 30% asset A and 70% asset B.

Portfolio C: Expected return= 14.2% Standard deviaiton= 30.62%

Question:

A)Plot the attainable portfolios for a correlation of 0.35. Now plot the attainable portfolios for correlatio of +1.0 and -1.0.

B) Suppose a risk-free rate has an exdpected return of 5%. By definiton, its standard deviation is zero, and its correlation with another asset is also zero. Using only asset Aand the risk-free asset, plot the attainable portfolios.

Abhinav 02-Dec-2019

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