MATH 246 Midterm: Exam 2 Solutions Spring 2011
14 Mar 2019
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The answers on this exam are entirely my own work. I neither gave nor received any aid while taking this exam. You have 75 minutes to take this exam. Please remember to write your name legibly on every page. This exam will be graded out of 95 points. The number in parentheses for each question is the amount of points assigned to the question. The exam has five questions and 11 pages, including this page and a page of scratch paper at the end. Your portfolio of assets has an expected return of 8 percent/year and a standard deviation of 20 percent/year. You are now given the opportunity to include in your portfolio an asset with an expected return of 6 percent/year and a standard deviation of 40 percent. Call this the extra asset and call your original portfolio the old portfolio. The return to the extra asset is uncorrelated with the return to the old portfolio.
