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Mathematics, 28.02.2021 17:00 luis759

The "Investments" worksheet contains information on 5 investments. At the top of column B (B2:B6) are the expected (average) returns of
the five stocks. Just to the side in column C (C2:C6) is the standard deviation of the
return of each investment. Column D (D2:D6) shows the amount of money invested
in each investment. The values in rows 10 through 14 are the correlation values that
quantify the pairwise relationships between the investments.

Investment data:

ABCDEF
1 Mean Annual ReturnStandard Deviation of Annual ReturnMoney Invested
2Investment 10.1640.059$7,700
3Investment 20.1720.071$6,500
4Investment 30.1220.028$7,700
5Investment 40.1100.083$5,400
6Investment 50.1500.110$6,000
7
8Correlation Matrix
9 Investment 1Investment 2Investment 3Investment 4Investment 5
10Investment 110.420.76-0.54-0.25
11Investment 20.4210.68-0.22-0.30
12Investment 30.760.681-0.83-0.58
13Investment 4-0.54-0.22-0.8310.57
14Investment 5-0.25-0.30-0.580.571
Question 1: A: What is the correlation between Investment 3 and Investment 4? Give your answer
to 2 decimal places.

Question 1: B: What is the covariance between Investment 3 and Investment 4? (Hint: use the
covariance formula.) Give your answer to 4 decimal places.

Question 1: C: Suppose that you created a portfolio of these 5 investments using the amounts of
money shown at the top of column D (D2:D6). What would the expected annual
return of the portfolio be? Give your answer to 3 decimal places.

Question 1: D: Using the portfolio of the previous question, what would the standard deviation of the
return of the portfolio be? Give your answer to 4 decimal places.

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Answers: 3

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The "Investments" worksheet contains information on 5 investments. At the top of column B (B2:B6) a...

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