Problem 1:
The market portfolio is assumed to be composed of two securities, Investment X and Y as shown below. Determine based on the information given the Average return, Standard Deviation and Coefficient of Variation. Which is a better investment?
Year Return X Return Y
1997 16.5% 17.5%
1998 14.2% 13.2%
1999 13.5% 14.5%
2000 16.1% 15.1%
2001 12.2% 13.2%
2002 11.5% 10.5%
Problem 2:
A portfolio consists of five securities with the following Beta and Proportions: What is the Beta of the portfolio?
Asset Beta Proportions
1 1.35 .1
2 1.12 .2
3 1.67 .3
4 1.04 .2
5 1.55 .2