Wat are the mean and variance of the portfolio value

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Reference no: EM13612909

Financial Managers Inc buy and sells a large number of stocks routinely for various accounts that it manages. Portfolio manager Andrea Colson has asked for your assistance in the analysis of the Johnson Fund. Aportion of this portfolio consists of 10 shares of stock A and 8 shares of stock B. The price of A has a mean of 10 and variance of 16, while the price of B has mean of 12 and variance of 9. the correlation between between is 0.3

a) What are the mean and variance of the portfolio value?

b) Andrea has been asked to reduce the variance (risk) of the portfolio. She offers to trade the 10 shares of stock A and receive and 2 offers, from which she can select one. 10 shares of stock 1 with a mean price of 10, a variance of 25, and a correlation with the price of stock B equal to -.2 or 10 shares of stock 2 with mean of 10, a variance of 9 and a correlation, with the price of the stock B equals to +0.5. Which offer

Reference no: EM13612909

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