7-3 Fill in the spreadsheet below to calculate the portfolio return and risk between Zenon and Dynamics, given the 10 years of annual returns for each stock, and portfolio weights of 50/50. a. How would your answer change if the weights were 40 percent for Zenon and 60 percent for Dynamics? b. How would your answer change if the weights were 30 percent for Zenon and 70 percent for Dynamics? Zenon Dynamics Expected Retum Variance Standard Deviation Covariance Weight for Zenon 50% 50% Weight for Dynamics Expected Portfolio Retum Portfolio Variance Portfolio Standard Deviation

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Solution:

AZenonDynamics
200215.56%51.00%
200318.34%78.56%
200416.47%44.67%
20057.56%67.56%
200620.09%34.56%
2007-15.23%24.42%
200834.56%7.89%
200913.56%24.78%
2010-12.34%30.79%
20119.89%-47.67%
Expected return10.85%31.66%
Variance0.02216050.12221
Standard deviation14.89%34.96%
covariance0.0012709
Weights for zenon40%
Weights for dynamics60%
Expected portfolio return23.33%
Portfolio variance0.0482191
portfolio standard deviation21.96%

The expected portfolio return would increases and portfolio variance and standard deviation increases.

BZenonDynamics
200215.56%51.00%
200318.34%78.56%
200416.47%44.67%
20057.56%67.56%
200620.09%34.56%
2007-15.23%24.42%
200834.56%7.89%
200913.56%24.78%
2010-12.34%30.79%
20119.89%-47.67%
Expected return10.85%31.66%
Variance0.02216050.12221
Standard deviation14.89%34.96%
covariance0.0012709
Weights for zenon30%
Weights for dynamics70%
Expected portfolio return25.41%
Portfolio variance0.0624704
portfolio standard deviation24.99%

The expected portfolio return would increases and portfolio variance and standard deviation increases