write my assignment 8516
1. The following information is available on the percentage rates of return on various assets for the last three years. You determine that this is a sample which is representative of the data population for these securities.
Security
Share A
Share B
Market Government Bonds
Year 1−6% 32%
Year 2−18%−22%
Year 3 60% 35% 20% 10%
50% −10% 10% 10%
- (a) Consider only shares A and B for this part. Compute the portfolio weights that yield the portfolio of A and B which has the lowest possible standard deviation. Then compute that portfolio’s expected return and standard deviation. Hint: Write down the formula for this, then compute all the ingredients you require.
- (b) What is the numerical equation for the Capital Markets Line in this situation?
- (c) Do shares A and B plot on the Securities Market Line? Hint: you will have to determine Betas in order to figure this out.