Solution-Determining the risk of the portfolio

Determining the risk of the portfolio

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Reference no: EM133204997

The Bank of Tinytown can only approve two loans but has four loans that the credit department has identified. Given the data presented in Table 1 what are the expected return and standard deviation of the portfolio that has the least risk? Given the covariances, can the calculation be simplified? What will the risk of the portfolio be, given the simplification?

Table 1
Item	Loan Size	Return	Variance and Covariance
Item	($ million)	(%)	Loan A	Loan B	Loan C	Loan D
Loan A	$ 1,600.0	11.0	0.1065
Loan B	$ 1,600.0	7.50	0.0425	0.0525
Loan C	$ 1,600.0	12.0	- 0.1000	0.0650	0.0975
Loan D	$ 1,600.0	8.0	0.0850	0.0355	0.0750	0.0825

Reference no: EM133204997

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Determining the risk of the portfolio

Reference no: EM133204997

Reference no: EM133204997

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