Given two random variables x and y, that represent the returns of two assets under different
states:
State of Nature Probability of State of Nature X Y
I 0.20 18% 0%
II 0.20 5% -3%
III 0.20 12% 15%
IV 0.20 4% 12%
V 0.20 6% 1%
i. Calculate the mean and variance of each of these variables, and the covariance between them.
ii. Find the portfolio that has the minimum variance, where wX is the weight of asset X and wY = 1
wX is the weight of asset Y. Calculate the mean and variance of that portfolio..
Given two random variables x and y that represent the retur.pdf
1. Given two random variables x and y, that represent the returns of two assets under different
states:
State of Nature Probability of State of Nature X Y
I 0.20 18% 0%
II 0.20 5% -3%
III 0.20 12% 15%
IV 0.20 4% 12%
V 0.20 6% 1%
i. Calculate the mean and variance of each of these variables, and the covariance between them.
ii. Find the portfolio that has the minimum variance, where wX is the weight of asset X and wY = 1
wX is the weight of asset Y. Calculate the mean and variance of that portfolio.
