It would be great if you could also list the formulas used. Thank you in advance! Portfolio Risk Assume that a company has an existing portfolio A with an expected return of 9 percent and a standard deviation of 3 percent 7-6. The company is considering adding an asset B to its portfolio. Asset Bs expected return is 12 percent with a standard deviation of 4 percent. Also assume that the amount invested in A is S700,000 and the amount to be invested in B is $200,000. If the degree of correlation between returns from portfolio A and project B is zero, calculate: a. The standard deviation of the new combined portfolio and compare it with that of the existing portfolio b. The coefficient of variation of the new combined portfolio and compare it with that of the existing portfolio A B C D E F 1 2 |Student instructions: This worksheet is for problem 7-6. Information necessary to solve the problem is listed below in column B. Enter formulas in the blanks where indicated to complete the calculations needed for the standard deviation and coefficient of variation of the new combined portfolio containing the added asset B. Note the difference between the standard deviation and coefficient of variation of the existing portfolio A without Asset B, and the standard deviation and coefficient of variation of the new combined portfolio with 4 6 Asset B 7 8 9 10 PROBLEM 7-6 11 12 13 Effect on Risk of Adding a New Asset to a Portfolio 14 15 Given: 16 17 Expected Return of existing portfolio A Standard deviation of existing portfolio A 9.00% 18 3.00% 19 Expected Return of new asset B 20 12.00% 21 Standard deviation of new asset B 4.00% 22 $700,000 $200,000 23 Amount invested in Portfolio A 24 Amount to be invested in Asset B 25 26 Correlation coefficient r between 27 existing portfolio A and new asset B 0 28 uON 29 30 Preliminary calculations: 31 Coefficient of variation of existing portfolio A: Coefficient of variation of new asset B 32 33 34 Total value of new combined portfolio: 35
It would be great if you could also list the formulas used. Thank you
It would be great if you could also list the formulas used. Thank you in advance! Portfolio Risk Assume that a company has an existing portfolio A with an expected return of 9 percent and a standard deviation of 3 percent 7-6. The company is considering adding an asset B to its portfolio. Asset Bs expected return is 12 percent with a standard deviation of 4 percent. Also assume that the amount invested in A is S700,000 and the amount to be invested in B is $200,000. If the degree of correlation between returns from portfolio A and project B is zero, calculate: a. The standard deviation of the new combined portfolio and compare it with that of the existing portfolio b. The coefficient of variation of the new combined portfolio and compare it with that of the existing portfolio A B C D E F 1 2 |Student instructions: This worksheet is for problem 7-6. Information necessary to solve the problem is listed below in column B. Enter formulas in the blanks where indicated to complete the calculations needed for the standard deviation and coefficient of variation of the new combined portfolio containing the added asset B. Note the difference between the standard deviation and coefficient of variation of the existing portfolio A without Asset B, and the standard deviation and coefficient of variation of the new combined portfolio with 4 6 Asset B 7 8 9 10 PROBLEM 7-6 11 12 13 Effect on Risk of Adding a New Asset to a Portfolio 14 15 Given: 16 17 Expected Return of existing portfolio A Standard deviation of existing portfolio A 9.00% 18 3.00% 19 Expected Return of new asset B 20 12.00% 21 Standard deviation of new asset B 4.00% 22 $700,000 $200,000 23 Amount invested in Portfolio A 24 Amount to be invested in Asset B 25 26 Correlation coefficient r between 27 existing portfolio A and new asset B 0 28 uON 29 30 Preliminary calculations: 31 Coefficient of variation of existing portfolio A: Coefficient of variation of new asset B 32 33 34 Total value of new combined portfolio: 35
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