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le three alternatives. c. Use your findings in parts a and b to calculate the coefficient of variatio each of the three...

le three alternatives. c. Use your findings in parts a and b to calculate the coefficient of variatio each of the three alterCHAPTER 8 Risk and Return 333 a. If the returns of assets V and W are perfectly positively correlated (correlation coefficien

le three alternatives. c. Use your findings in parts a and b to calculate the coefficient of variatio each of the three alternatives. d. On the basis of your findings, which of the three investment alternatives do recommend? Why? LG 4 P8-15 Correlation, risk, and return Matt Peters wishes to evaluate the risk and return be haviors associated with various combinations of assets V and W under three as- sumed degrees of correlation: perfectly positive, uncorrelated, and perfectly negative The expected returns and standard deviations calculated for each of the assets are shown in the following table. Asset Expected return, 7 8% 13 Risk (standard deviation), o, 5% 10 W
CHAPTER 8 Risk and Return 333 a. If the returns of assets V and W are perfectly positively correlated (correlation coefficient = +1), describe the range of (1) expected return and (2) risk associ- ated with all possible portfolio combinations. b. If the returns of assets V and W are uncorrelated (correlation coefficient = 0), describe the approximate range of (1) expected return and (2) risk associated with all possible portfolio combinations. If the returns of assets V and W are perfectly negatively correlated (correlation coefficient = -1), describe the range of (1) expected return and (2) risk associ- ated with all possible portfolio combinations. Personal Finance Problem no Ine Martinez a V.S. citizen living in Brownsville,
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Answer: Asset Expected Retum, i Risk (6) 87 S% W 13 107 • Expected Return oq portfolio is weighted Average Return S FORMULAColculation of Portfolio Risk لطلبا 13% Coxa when Correction Gefficient is 18 = +11 Weights Assigned Expected Return 1oox 0.2

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