00:01
Hello everyone, so let's do the statistics question.
00:03
But before i get started, i recommend that you do the question yourself and come back to see if you got it right or not.
00:09
So hopefully you've done the question yourself and how's work on it together.
00:12
So we have a portfolio that combines the rest free asset at the market portfolio.
00:17
It has expected term in 9 .13 % standard deviation 20%, risk rate 2 .5%.
00:24
Expected rate on the market portfolio is 11%.
00:27
And what we want to know is what range captures 95%.
00:31
4 % of the actual market portfolio returns and what rate of return would a security expect to earn if it had a 0 .45 correlation with a market portfolio and a standard deviation of 75%.
00:44
So obviously a lot of numbers here.
00:46
It can look a bit intimidating of a question, but it is okay.
00:49
It's just about kind of separating the values, putting on the right categories and working through your calculations like that.
00:56
So our portfolio, i like to write down all the numbers that i'm going to be using, just so it makes it easier for me to refer back to it while i'm doing my calculations.
01:09
So portfolio expected return and 3%.
01:18
We have our portfolio deviation, or sorry, my bad, it was 20%.
01:40
And then the risk -free rate, which is 2 .5%.
01:50
And then we have our which was 11%.
02:07
And then the correlation, which is basically our security and market returns, which was 0 .45.
02:17
And our standard deviation with security was 75%.
02:26
Okay? these were the values that were given.
02:29
So our slope, we want to find this slope of our capital market line.
02:42
Slope market line that will help us get into the way of figuring out the range that captures 95 .4%.
02:51
So we would do that is by doing all divided by increase.
03:32
Or we could do, and that's basically the equivalent to minus the standard deviation...