Posted by **Mitchell** on Wednesday, June 20, 2007 at 10:37pm.

Ra Rb

Year 03 40% -30%

Year 04 -24% 22

Year 05 30 42

year 06 26 46

Corrleation coefficinet= -.2374

Construct a portfolio P that contains A and B in proportions of 40% in A and 60% in B and calculate the returns on the portfolio for each of the years 03 thru 06.

I have no clue how to start this.... Please help.

Question: does the portfolio manager re-adjust the portfolio every year to maintain a 40/60 split.

For now, I will assume no, and assume that gains and losses are compounded.

An Excel spreadsheet is very useful for these types of operation. Assume that the initial P=100 and that in year 02 $40 is invested in A and $60 in B. In 03 A grows to 1.40*(40)=56 and B declines to .70*(60)=42.

In 04, A declines to .76*56=42.56 and B grows to 1.22*42=51.24.

Take it from here.

## Answer this Question

## Related Questions

- Finance - Consider a risky portfolio. The end-of-year cash flow derived from the...
- finance - Thompson stores is considering a project that has the following cash ...
- Urgent math - A couple needs a mortgage of $300,000. Their mortgage broker ...
- Finance - 2. You are now considering adding a corporate bond to your investment ...
- Finance - Cindy has an income of 56,000 in year 0. Calculate her income in year ...
- Finance - 9. H Corporation is considering a training program that cost $600,000...
- Kennedy king finance - 10. Compute the present value of $3,000 paid in four ...
- Economics(Please respond, thank you) - The table below shows the market basket ...
- Finance - 10. Compute the present value of $3,000 paid in four years using the ...
- Finance - A job pays a salary of 35,000 the first year. During the next 10 years...

More Related Questions