Question

Problem 1 Part B.1 (Refresh of Linear Algeb). Consider these two vectors ·Wy=0.5 0.5], and the following matrix Σ 0.1 0.2 0.2 0.3 Compute u2 Couldw denote a vector of weights? What about w2? (Exercise n. 3.a CFA). Anne Grace has a S900 000 fully diversified portfolio. She subsequently inherits ABC company common stock worth $100 000. Her financial The correlation coefficient of the ABC stock returns with the original portfolio The inheritance changes Grace's overall portfolio and she is deciding whether adviser provided her with the following estimates returns is 0.40 to keep the ABC stock. Assuming Grace keeps the ABC stocks, calculate the Problem 3 Expected Return Standard Deviation 1.6 ABC Company 1.25% expected return of there new portfolio which includes ABC stock - covariance of ABC stock returns with the original portfolio returns standard deviation of her new portfolio which includes the ABS stock

Answer 1

Roblem A 1x2 2XI 2x 2 o-or 0.0s 2x2 IX 2 0

040 whřch À^duda tac stocks ะ = 0.00728

R,, R 0-40 x 0.0237メ 0.029 essin., þ.tfoNa ะ 0.0002ד י cc. t 2x0.9 x 0.1x 0.00。27," . 二 0.000514 Stand cfevia Won