Consider the Following Data for Assets a and B $\bar { R } _ { \mathrm { A } } = 10 \%$

question 34

Essay

Consider the following data for assets A and B: $\bar { R } _ { \mathrm { A } } = 10 \%$ ; $\bar { R } _ { B } = 19 \%$ ; $\sigma _ { \mathrm { A } } = 3 \%$ ; $\sigma _ { B } = 5 \%$ ; $\beta _ { \mathrm { A } } = 0.6$ ; $\beta _ { B } = 1.4$ ; $\rho _ { A B } = 0.4$ .
a. Calculate the expected return, variance, and beta of a portfolio constructed by investing 1/3 of your funds in asset A and 2/3 in asset B.
b. If only the riskless asset and assets A and B are available, find the optimum risky-asset portfolio if the risk-free rate is 8%.

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Definitions:

Adolescence

The period of maturation involving both mental and physical changes, occurring from puberty to the age of legal responsibility.

Menarche

The commencement of menstruation in females, indicating the start of reproductive ability.

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A parenting style characterized by high demands and low responsiveness, where parents set strict rules and expect obedience without question.

Authoritative Parents

Parents who combine warmth and empathy with clear and fair rules and expectations, fostering independence and high self-esteem in their children.