What is going to be the return of the new portfolio

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Reference no: EM132669711

Let S1, S2 be two stocks with daily returns of 0.5, 0.3, 0.6 and 0.2, 0.1, 0.25 respectively. Assume we have two portfolios with weights 0.6, 0.4 and 0.2, 0.8.

Problem a. Using matrix multiplication what is going to be the return of each portfolio for each of these days?

Problem b. Assume you have a third portfolio which consists of 40% invested in the first portfolio and 60% invested in the second portfolio.

(I) What is going to be the return of the new portfolio for each of the 3 days?

(II) Find the weights invested directly in S1, S2 in this new portfolio

(III) Calculate the performance using last question. Do you get the same result?

Reference no: EM132669711

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