2Dec 22 Pxokiem Quation

Potolio Haragemant.
Botywed.
0. A td has iwesteol50,o00 in a
pot olio shaes.
t thas unvestad 3o un 8hates e A Ltd. and balane un
shaxos in B.Ltd. The expestad etwn pom the ioo
Conpanius axe 157 and i27 xpectively. FE and t the

xpeeteol xetuun in poeotage aol un absoluth

Omeudt.
Sslutusn. Atd 30 oshaxe.
B.td F67 hana.
The expeted utun may cbe jound as wda
Sect Weight (w)Ratwn(R R Amuct RatuwunA.

A 0.30 0.15 0.0450 5,000 63

(307) 137) (30 soom) 225o

B 0.-0 0.12 0.084 35,

C#o7) CL2) GOZ l5a0on)4 200
o.12.90 50,000 6450

Absolute Retuun=`$45o
,Rekun=_Absplute Rotwn
Ameuut inveated
64SO x too
50,00 o
= O, 129 O xloo
12.9
Dec 22
Potolio Ratwun can also be aunol as.

=
(o.3x
wi
0.)5)+ (.
wi
xO.Wi12)
A B
= 0.129 |12.3/

.Famoc Ltd const uetinq_ a patloio kisk

and uuk tea inveatmant. by inveting 3o. and
F01 unda in qhem keapecti vely. The
eqeated Jetiun en iskywnvestments us 167.
and on_Jusk yro2 unvetment s z7., Th
Standand Deviatianluisk) the siky imeatant
Fid aut he expectea Molixn and
usk h pedHolio
Solutien The expeateol Atuun ¥p e he ptIdo and
the iak ihe peajola can be caleulated or Jalss:

= lo.30xo.15) 0.Ox0.0)
= _0.094
= 9.4%
0 p 084 (0,30x a08)=0.024
2.44
oy be natd tha he uR Q petclo dlepenela
upon dthe uskyH uniestment
 (3) The Mk ano Metwn chaxacteisbics o dhe tuoo
preeats ae shouon below

X Y
Expected Rotwun 2 2O%
RiR 3 %

An cunvestst plaun to nvest so7 uts auailable

ndo uu preject x and 2o in Y. The corelatiem
Coeicier blw th Maturn t h pojeeo_ +lo.

Find out Ihe sisk and hatuan the pokdolia X

Soluston Expeoted Retun s tha Patlolio.

Pa
Twestmert Epected Retoy Aropstion. weightal Ratwn
12 80% 3.6
(0.12) (0.8o)
Y 207 20 4.0
0.20) (o.20)
13.61
2
Retun

(0.03x.80) + (.0-X 0.20) +2x0.20 x0.20x

0.03 X 0.0X
=
Exs6)+(2+20)+ 2 (80) (20))(Á)
0 . 0 2 4 + 6.014+0.06064

5 4600+ 19600+6-200
14940o 14.44
p8.8
 So dhe iaR and uotiun ot the pedtholio a
3.8 and 136: pectively.

An univesto hos Ouatud a petjotio 5 secuities

about uhich dhe Jollouwing nomaton iaus onailab.

SeCuLy Cuerc Value (TEpesedlalue (T)

2500 4O00
5 000
JL
lo,o00 12,000
5, O00 7,000
3500 5,000

25,000
Find de expected hati o duwn tho polio

Spluthen eigts o duekent secuities, Retua o diexoncds

3euities anod ptalio xoluun canbe caleulatnd as
ellos 4pectect Ratun
YealyRatiun. Rotwn Wx % Rotunn e
Seilie Weighta
To-T)
6o O.06
I500
L6% looa 25% .04
2000 207 D.08
207. 2000 Ho. 0.08
437 0.0602
H 500

0.32
oo

Epected Retwy =|32%

 TheNotloecing unomation cecletatee onodlable in
HApect o t seeuties
soCwit 6xpertel Rgtuun RR o

20
12
15%

a pslio o be contructesk,would any

PCuydomin.ada othuaye uehy? Finok ut the
coecent svaiction esecuubies. T andL
Solustion the 3s0cuies th seci L oGal
dominate awex secuuities I kwme secuw I
ha same totwn 1o% as secwity I,but the
3eCity I haa dauoeL kisk o 2 s compaireed

I wuld dominatL oveH Secuty L

Coidet vaicctu en el seeuutyL 0

0.2.0
0.18
2 Coliciento vaiakon aseuuty =

0.15 = [1.50
O.lo
 Follewing injoumation us auaulable in s p e t
Shata ABC td. and KY2 td,

Rottuun Risk

ABCtod. 14.507 5.20 7

1&307. 5.50 /
XYz ttd.

Catelation beuweanAe Koiun us +0.55, Find

0 t thecaiance blw dhe shaxes etuuna.

Selutuon PAx CoA (Ss20

Pax AA CovAX
Cep
CeNA Pax xA
COV A
COvA 0.55 x5.20 x 5.50)
=0.55 x 28.6.
= |I5,73
 The yollauwing a the expeoteol otwn R, and suisk O
outho ioo secwuities A andB

Secw

A Io, 20

12 257.

The cotlation cotiuent blw dhe setuwn e A B üs

0.5. AIweatmert to deeioke about the.
8_as *
prdaio A and z5 +28z e 25,
75.,hich ane shouud be aocept?
Soluaon. The lacisisn_Hagaling delatien o potoluio con be
taRen upon tha baais ey expeatesd oliun aral
e dthe peHtAslia ie 4B nd AB.

The expeated tetiwn Ya depetlelio

Bae A

Fo 57, +257pslia A anol B

AAe 0.10x5 + 12.x25
0.+5 +o.30
o.1050 l0.507,

VAR=.20x.35+.25%,25+ 2x:20 x 25x.75

2
X.25 x.5.
1822.
18.92.7.|
 /_
F 257, + F57. pedyoluo Aand B

s O.10x.2.5+12 x.+5.
0.02.5 +o.09.

015

AB 20x25+25x7s*+2x .20x25x.25x Sx.5

.
2169 21,63 7.

Tn dhia cose,tke ot0lio e Aand 8 75 +257

and 25 t 75757axe thaving d i e a expecteal
Hanuunand uiR. So,ceiuont o vaicction , Cv
Cie o 7) may be ueo.

= 18.92 = 8o2.
1o.S

2169 =L8 8
Cas,+s) L1.5

hact this.
As athe & CV e 25+75 u igheH t e a n a
podlalio in ukieyThe invest should aka4t
(+5Zt257) thouqh t i hawing a desse
ctun o .S7.