Tuesday

October 21, 2014

October 21, 2014

Posted by **John** on Wednesday, October 29, 2008 at 9:28am.

Suppose that a portfolio consists of 3 securities (1,2,3). Expected rates of return are: 5%, 9%, 14% of the 3 securities, respectively.

(1) Find the expected rate of return on each of the two portfolios of these securities:

Portfolio A where w1=w2=w3

Portfolio B where w1=w2 and w2=2w3

(I solved this)

(2) Assume both portfolios have the same risk (10%) which one would you choose?

(I solved this)

(3) Assume your portfolio amount or wealth is $10000, how much have you invested in each of the three securities in your chosen portfolio.

(I solved this)

(4) Find the expected total cash flow and expected net cash flow of the portfolio at the end of the period.

(Don't have formula for this, cannot solve. If someone can help me out, please lead me in the right direction)

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