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Risk and Return. Suppose you purchased $1,000 of Stock A

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Risk and Return.
Suppose you purchased $1,000 of Stock A with your own money. You then borrowed $500 and used this money to buy Stock B. This means that the portfolio weights are as follows: wA = 1000/1000 = 1.00; wB = 500/1000 = 0.50; wC = -500/1000 = -0.50. The correlation coefficient between A and B is 0.70; interest rate on the risk-free asset (Security C) is 5%; variance of Stock A is 0.25; variance of Stock B is 0.49; expected return on Stock A is 10% and Stock B is 16%. Risk and Return. Calculate the variance of a portfolio of the three securities.
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Customer: replied 3 years ago.

Can you please show numbers inserted in formulas? Need to show full work with formulas presented. Thanks!

When you will click on respective cell the figures will be shown. However, it has been calculated as follows:
1*0.5*.25*.49+0.5*-0.5*.49*.49+1*-0.5*.25*.49 = -.06003

Customer: replied 3 years ago.

I see that part, I guess I was just wondering how you achieved the variance of the third security because it was not given. And the covariance.

The third security is the B which you have invested from borrowing therefore it is equal to 0.49, thanks.
Customer: replied 3 years ago.

ok, what about the part of the formula that states (Cov s1,s2) (Cov s3,s2) (Cov s1, s3) and then I get it :-)

Covariance of A is s1, Covarince of B is s2 and Covarinace of C is s3
Customer: replied 3 years ago.

Right but what are they?How do you find them?

It is given in quetion as 0.25 for A and 0.49 for B and 0.49 for C
Customer: replied 3 years ago.

So variance and covariance are the same? I am sorry, I didn't know they were the same.

Yes they are the same.
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