Correlation coefficient between the two funds

Reference no: EM13826630

Problem:

The universe of available securities includes only two risky stock funds, X and Y, as well as T-bills. The data for the investment universe are shown in the table below. The correlation coefficient between the two funds is -0.3.

Expected return Standard deviation

X 0.15 0.25

Y 0.35 0.55

T-bills 0.06 0

a. Find the optimal risky portfolio and its expected return and standard deviation.

b. Find the slope of the Capital Allocation Line supported by T-bills and the optimal risky portfolio.

c. If an investor's utility can be represented by U = E (r) - 6σ², how much will the investor invest in funds X and Y and in T-bills?

Reference no: EM13826630

Questions Cloud

Write a marketing plan for a company or product : Write a marketing plan for a company or product

Relationships among coupon rate : Derive the relationships among coupon rate, current yield, and yield to maturity for bonds selling at discount from par, at par, and at premium over par. (You may assume that the bonds have one year to maturity).

Develop appropriate administrative systems : Develop appropriate administrative systems, consult with appropriate colleagues, and initiate communication strategies & evaluation systems

Determine the betas of the two stocks : Use the information in the following table to determine the betas of the two stocks.

Correlation coefficient between the two funds : The universe of available securities includes only two risky stock funds, X and Y, as well as T-bills. The data for the investment universe are shown in the table below. The correlation coefficient between the two funds is -0.3.

Correlation coefficients between each pair : Stocks J, K, and L all have the same expected rate of return and standard deviation. The correlation coefficients between each pair of these stocks are as follows:

Write review of india to act over predatory airline pricing : The article related to economics and it is deals with increase airline ticket fares during festive seasons in India. Indian airline industry has grown steadily over the past decade.

What is the country environmental regulation level : What is the country's environmental regulation level? What kind of legislation has been passed in the country regarding working hours and wages? Do you think the country's environmental regulation is sufficient? Explain

Report on situation analysis for a multinational corporation : report on the situation analysis for a multinational corporation

User Account

All Pages