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FIN 435 - Problem Set (2-Asset Portfolios)

This document provides information and calculations for three 2-asset portfolio problems. It gives the probability distributions, returns, and investment allocations for stocks A and B. For each problem, it asks the reader to calculate the standard deviation of the portfolio based on the given information and show their work.

Uploaded by

Md. Mehedi Hasan
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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58 views3 pages

FIN 435 - Problem Set (2-Asset Portfolios)

This document provides information and calculations for three 2-asset portfolio problems. It gives the probability distributions, returns, and investment allocations for stocks A and B. For each problem, it asks the reader to calculate the standard deviation of the portfolio based on the given information and show their work.

Uploaded by

Md. Mehedi Hasan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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FIN 435 – Problem set (2-asset portfolios)

1. Consider the following probability distribution for stocks A and B:

State Probability Return on Stock A Return on Stock B


1 0.30 10% 8%
2 0.40 12% 7%
3 0.30 15% 4%

If you invest 40% of your money in A and 60% in B, what would be your portfolio's standard
deviation?

Portfolio standard deviation = …………………………………………..

Show your work below. Use the other side of this page, if necessary.
2. Consider the following probability distribution for stocks A and B:

State Probability Return on Stock A Return on Stock B


1 0.40 15% 20%
2 0.40 12% 12%
3 0.20 9% 24%

If you invest 60% of your money in A and 40% in B, what would be your portfolio's standard
deviation?

Portfolio standard deviation = …………………………………………..

Show your work below. Use the other side of this page, if necessary.
3. Consider the following probability distribution for stocks A and B:

State Probability Return on Stock A Return on Stock B


1 0.50 15% 17%
2 0.20 12% 12%
3 0.30 3% 20%

If you invest 65% of your money in A and 35% in B, what would be your portfolio's standard
deviation?

Portfolio standard deviation = …………………………………………..

Show your work below. Use the other side of this page, if necessary.

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