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  #1  
Old 10-05-2014, 08:17 PM
jjhi jjhi is offline
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Default Portfolio theory with riskless asset

Consider the following data:
Expected Return Standard Deviation
Russell Fund 16% 12%
Windsor Fund 14% 10%
S&P Fund 12% 8%
The correlation between the returns on the Russell Fund and the S&P Fund is .7. The
rate on T-bills is 6%. Which of the following portfolios would you prefer to hold in
combination with T-bills and why?
(a) Russell Fund
(b) Windsor Fund
(c) S&P Fund
(d) A portfolio of 60% Russell Fund and 40% S&P Fund.

-I've been struggling with this question on the homework. Can someone please explain the steps needed in solving this problem? Thank you!
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  #2  
Old 11-04-2014, 10:18 PM
uoit uoit is offline
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Default Re: Portfolio theory with riskless asset

1) calculate ER on the russel and S&P fund, (.6*.16)+(.4*.12) = 14.4%

2) calculate the standard deviation of the S&P and russel fund
9.71% (check for formula online

now you can clearly see that all the other funds arent at least as good as the russel and s&p fund combined so you should chose that fund
cheers
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Old 09-15-2015, 08:11 AM
wafiyag wafiyag is offline
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Default Re: Portfolio theory with riskless asset

The risk less asset was added to our portfolio to ensure some level of consistent and expected returns in the near future. Most companies have recently discovered that asset management should be a key part of the success. It is now realized that asset management leads to economy.
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Old 06-30-2016, 05:21 PM
AgentProv AgentProv is offline
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Default Re: Portfolio theory with riskless asset

calculate the standard deviation of the S&P and russel fund
9.71%
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