PranavAurora

Face100 Problem Set 6 Fnaloo 002

peeled
Morifolio

in

Ocp standarddeviationofportfolio
d 754 security 1 251 security 2

Themaximum portfolio deviation occurs when the correlation value is 1

0.420.12 t 210.6710 4 0.25 0.127 1

Op 0.630.25

OF 0.0392
Op 0.198

hereis no diversification of independent risk as all the assest have

Tesame common systematic risk

3 a i security2
ii security1
op XO I4102 want to pickonewith

security 1 Thereis nowayof reducing rish through

diversification
b portfolio of
just
c Op xO x 027

Yi X 0.615 61.5 t of asset I

gg Xiggf.gg
42 gig a 42 5.0
4 2 0.3846 38 54 of assert 2
09

I 0.615 0.1 0.3846 0.16

Rp 0.123
This ishigher than T Bill
Investors would not want to invest in T Bills as thishas
higher returnand is riskfree Op o aswell

a Fp 8t
Op O

b RJ 0510.087 0.510.16

Rp y
2 0.510.17 210
op 0.570
Op 0.0023
0.052
10
9 RE 125 0.167 0.2570.08

IRIA
OF 1.25 0.10125

0.1252
10
Op 0.2 be double
must

Opt0.04

0.04 XRCO
it expected returnfrom
this is
Xi 4
2001 is the fund
mutual
ftp KZ
10.0 210n 0

142 Borrow1001 ofyour networkbysellingshort theargg

Goal maximize the sharpe ratio

RE0.06
Riff
Sharperatio

a SR 0.16 0.06 0.833

b SR 0.800
0.1801
c SR 0 0.75
30.06
Rm 0.6 6167 0.410.12 0.144

Em 0.62 0.127 04210.087 210.6Co4 0.77 0.12 0.087 0.00943

Om I 0.097127
 SR
Right 1086487
Egg
for 60 40 Russelland
SIR S P is the highest

i I'd pick 60 40 Russelland

Sep

Op X203 4 503 214111 a a 02107

HID
Ep XP 0.0144 l XP 0 0064 24 xp 0.12 0.08 0.7

O'p 0.014442 0.006461 217 0.01344 2 2,4

0.0288 1 0.0128 0.01344 0.01344 0

doff 1

00437
14 3 Russel

11.04347 p
2 S

Rip 0.043 0.167 1 0434 0.127

R
 Rp 0.118 11.8 Y

I May Sharpe Ratio

ElRpf
W ER H NDECRI Rf 012 0.7 0.08 012
Teniente 02 0.00672

W EIR RAOF E Ra Rt Or
E R RI Ft E Ra RA OF EIRD Rft E RI
RA 8,2
W 0.16 0.06 0087 0.12 0.06 0.00672
0.16 0.06710087 0.12 0.00 0.127 10.1 0.0611000672

Russel find
1wi0552y
S P fund
4472
102 0

Fp 0.552 0.167 0 4477 0 12

0.1422
ftp I
1142J
00437 0.127 1 0437210.087 2110.043 1043710.7 0.171008

OF 6.38 103

0.0792
108 target op

portfolio D has highest shape ratio

 0.144
Fg
0 0.097127

Wi 0.09712 0.0792

1420.8137
81.34 in portofio D
18.64 in T Bill

Rp 0.813 0.1447 0.186 0.06

0.1282
14