Question
Question 7 5 pts You are given the following information for Securities J and K for...
Question 7 5 pts You are given the following information for Securities J and K for the coming year: State of Nature Probability 20.00% 50.00% 30.00% Return J 14.00% 19.00% 16.00% Return K 14.00% 16.00% 25.00% You create a portfolio, with 40 percent of your money invested in Security K. and the rest of your money invested in Security J. Given this information, determine the coefficient of variation (CV) of this portfolio for the coming year. Enter your answer with 4 decimal places. For example, if your answer is 12.25%, enter 0.1225. 5 pt Question 8
Answers
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.
A C D E State of Nature Probability 20.00% 50.00% 30.00% 2 Return) 14.00% 19.00% 16.00% 17.10% 2.02% Return K 14.00% 16.00% 25.00% 18.30% 4.45% 3 Expected return Standard deviation Covariance (JK) -0.000173 Portfolio Weight 60% K 40% Expected return of portfolio Standard deviation of portfolio 17.58% 1.95% Coefficient of variation of Portfolio 0.1111A B Ε State of Nature Probability 1 0.2 0.5 0.3 Return) 10.14 0.19 0.16 =SUMPRODUCT($C$3:$C$5,D3:D5) =SQRT(SUMPRODUCT((D6-D3:D5)^2,$C$3:$C$5)) 2 3 Expected return Standard deviation Covariance (UK) Return K 0.14 0.16 0.25 =SUMPRODUCT($C$3:$C$5, E3:E5) =SQRT(SUMPRODUCT((E6-E3:E5)^2,$C$3:$C$5)) 5 =SUMPRODUCT((D6-D3:05),(E6-E3:E5), 3:05) Portfolio Weight J =1-C12 0.4 к Expected return of portfolio Standard deviation of portfolio =C11*D6+C12*E6 =SQRT (C11*D7)^2+(C12*E7)^2+2*c11*c12*08) Coefficient of variation of Portfolio =C15/C14
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