How much should the correlation coefficient be to bring

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Problem A) An investor holds two equity shares x and y in equal proportions with following risk and return characteristics:

E(Rx) =24%; E(Ry)=19%, S.Dx=28%; S.Dy =23%

The returns of these securities have a positive correlation of 0.6. you are required to calculate the portfolio return and risk. Further suppose that the investor wants to reduce the portfolio risk S.Dp to 15 percent. How much should the correlation coefficient be to bring the portfolio risk to the desired level?

Problem B) Differentiate between systematic and unsystematic risk. Discuss the CAPM and its limitations.

Reference no: EM132962956

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