FINS5513_SECURITY VALUATION AND PORTFOLIO SELECTION_2006 Summer_ch8_two_security

University of New South Wales_FINS5513_SECURITY VALUATION AND PORTFOLIO SELECTION_2006 Summer

Chapter 8 2 Sec

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A B Chapter 8 Two Security Portfolio

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Asset Allocation Analysis: Risk and Return Expected Standard Return Deviation Security 1 0.08 0.12 Security 2 0.13 0.2 T-Bill 0.05 0

Corr. Coeff s,b Covariance 0.3 0.0072

Weight Security 1 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

Weight Security 2 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Expected Standard Reward to Return Deviation Variability 0.08000 0.12000 0.25000 0.08500 0.11559 0.30281 0.09000 0.11454 0.34922 0.09500 0.11696 0.38474 0.10000 0.12264 0.40771 0.10500 0.13115 0.41937 0.11000 0.14199 0.42258 0.11500 0.15466 0.42027 0.12000 0.16876 0.41479 0.12500 0.18396 0.40771 0.13000 0.20000 0.40000 Short Sales No Short Allowed Sales 0.82000 0.82000 0.18000 0.18000 0.08900 0.08900 0.11447 0.11447

Minimum Variance Portfolio Weight 1 Weight 2 Return Risk CAL(MV) Optimal Risky Portfolio Weight 1 Weight 2 Ex Ret St Dev. CAL(OR) Reward to Variability

Short Sales No Short Allowed Sales 0.40000 0.40000 0.60000 0.60000 0.11000 0.11000 0.14199 0.14199

0.42258

0.42258

Optimal Portfolio with a Risk Free Asset Short Sales No Short Allowed Sales Desired rate of return: 0.12 Weight OP Weight RF Ex Ret St Dev 1.16667 -0.16667 0.12000 0.16565 1.16667 -0.16667 0.12000 0.16565

Optimal Portfolio w/o a Risk Free Asset Desired rate of return: Weight 1 Weight 2 Ex. Return St Dev 0.12 0.20000 0.80000 0.12000 0.16876

Chapter 8 2 Sec