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problem: Assume you own a portfolio of T-Bills and 2 stocks: Motorola & Nokia. The share of the portfolio invested in T-Bills is worth 20,000 dollar, while the share invested in Motorola is worth $30,000. The rest of the portfolio is invested in 600 shares of Nokia. Assume the following is known: A share of Nokia trades currently for $120. Shares of Nokia have an average return of 15 percent and a volatility of 21%. Shares of Motorola have an average return of 12 percent and a volatility of 23%. The correlation between the two stocks is -0.1. Assume that, in addition, T-Bills have an average return of 4 percent while the market index has an average return 17% & a volatility of 20%.

If you are to reinvest the money into a new portfolio with the similar volatility as your current portfolio, find out the best expected return?

[A] 10.46%

[B] 12.51%

[C] 15.42%

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919351

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