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spacemanspliff spacemanspliff
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A month ago
Cinderella plans to form a portfolio with two securities: Jaq and Gus. The correlation between the two securities is —1. Given the following forecasts, what are the weights in Jaq and Gus that will set the standard deviation of the portfolio equal to zero?

State of the
Economy
Probability of
Occurrence
Jaq
Expected Return
Gus
Expected Return
High Growth15%25%-10%
Moderate Growth30%13%8%
Recession55%-5%12%


▸ Portfolio weights in Jaq and Gus are 25.63% and 74.37%, respectively

▸ Portfolio weights in Jaq and Gus are 39.49% and 60.51% respectively

▸ Portfolio weights in Jaq and Gus are 60.51% and 39.49%, respectively

▸ Portfolio weights in Jaq and Gus are 74.37% and 25.63%, respectively
Textbook 
Corporate Finance

Corporate Finance


Edition: 5th
Author:
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anikamazumderanikamazumder
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A month ago
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