Answer:
1a Return J=6.5% k=9.39% l=12.14%
1b. variance and standard deviation respectively
J=4.64%, 21.53% K=3.47%, 18.64% L=2.52%, 15.89%
1c. 10.23%
1d. 17.8%
Explanation:
1a Expected return
J=(0.25×0.065)+(0.36×0.065)+(0.24×0.065)+(0.15×0.065)=0.065
K=(0.25×0.240)+(0.36×0.120)+(0.24×0.030)+(0.15×-0.110)=0.0939
L=(0.25×0.260)+(0.36×0.180)+(0.24×0.090)+(0.15×-0.200)=0.1214
1b average return =0.2803(0.065+0.0939+0.1214)
Variance
J=(0.2803-0.065)²=0.04635/4.64%
standard deviation =√0.04635=0.2153/21.53%
K=(0.2803-0.0939)²=0.03474/3.47%
standard deviation =√0.03474=0.1864/18.64%
L=(0.2803-0.1214)²=0.02524/2.52%
standard deviation =√0.02524=0.1589/15.89%
Ic. portfolio return
=(0.09×0.065)+(0.51×0.0939)+(0.40×0.1214)=0.1023/10.23%
1d. Varance
(0.09×0.0464)+(0.51×0.03474)+(0.40×0.02524)=0.03199/3.1%
Standard deviation of portfolio
(0.09×0.2153)+(0.51×0.1864)+(0.40×0.1589)=0.1780/17.8%
