Greg is a prestigious Mutual Fund offering balanced Debt and Equity portfolios for the Retail investor. The typical portfolio P can be represented by P = wD D + wE E. The Debt and Equity funds offer an expected return and volatilities of E(rd), E(rE), sD, sE, respectively and a correlation coefficient of ?DE. We also know that the betas of portfolios D and E are ßD and ßE. Please mark the only INCORRECT statement about the properties of the balanced fund P:
a.
The beta of portfolio P will be ßP = cov(rP,rM)/(sM)2 , where M represents the market portfolio (S&P 500)
b.
The volatility of portfolio P will be sP = wEsE +wDsD
c.
The resulting Beta of the portfolio will be ßP = wDßD +wE ßE
d.
The expected return of portfolio P will be E(rp) = wDE(rD) + wEE(rE)
a.
The beta of portfolio P will be ßP = cov(rP,rM)/(sM)2 , where M represents the market portfolio (S&P 500)
b.
The volatility of portfolio P will be sP = wEsE +wDsD
c.
The resulting Beta of the portfolio will be ßP = wDßD +wE ßE
d.
The expected return of portfolio P will be E(rp) = wDE(rD) + wEE(rE)
