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a) Given that the expected return on equity is 15%, the expected return of bonds is 10%, the variance of equity is 400, the variance of bonds is 200. the covariance of bonds and equity is 100. the risk free rate is 6%. calculate the weight of debt
b) calculate the weight of equity
c) calculate the expected return of the portifolio
d) calculate the variance and standard deviation of the portfolioAre you setting me a test or what?
If you have difficulty understanding something than I will try my very best to explain, but do not just ask me to give the answer to a question that you have found somewhere!!!
Also, variance,covariance and standard deviation cannot be mentioned in Paper F9 – they are not in the syllabus. They could possibly be mentioned in Paper P4, but even there it is not so likely these days.
‘Weight of equity’ does not mean anything at all. I think you mean cost of equity.
Finally, portfolio theory is not in the syllabus for F9. It is in the syllabus for P4 (but only briefly) but not F9.
I don’t know who gave you the question, but if it was a tutor for an F9 course then I am afraid that they have no idea about the syllabus 🙂
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