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Mathematics, 23.03.2020 20:38 mauricestepenson791
STOCK 1 STOCK 2 Date Adj Close Adj Close 1/1/14 14.860933 137.560867 2/1/14 17.397705 144.171051 3/1/14 17.029367 150.691971 4/1/14 17.561832 153.807724 144.327347 5/1/14 6/1/14 18.065769 17.709583 142.734528 7/1/14 16.716169 150.923615
1. Let the stocks you chose be denoted by Stock 1 and Stock 2 below. What is the monthly expected return and the standard deviation of a portfolio that is composed of (x% Stock 1 and y% Stock 2), where {x, y] x%+y%=100%, x, y in {0,100}}
Have at least 5 expected value and standard deviation combinations calculated and use them to plot the efficient frontier.
2. What is the composition of a portfolio that is composed of Stock 1 and Stock 2 and that has the lowest standard deviation? (That is, what is the weight of each stock in lowest standard deviation portfolio... among all possible combinations, not only among the ones you calculated in question 1). You are expected to solve this question analytically.
3. You have $10K. What is the expected value and the standard deviation of a portfolio that is formed by investing $5K at the risk free rate and $5K on the portfolio you found in question 2 (assume that monthly risk free rate is 0.0025) ? Does there exist another portfolio consisting these assets AND that has a higher expected return and lower risk, measured by standard deviation? If there is, describe that portfolio with one sentence,
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STOCK 1 STOCK 2 Date Adj Close Adj Close 1/1/14 14.860933 137.560867 2/1/14 17.397705 144.171051 3/1...
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