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  • FormulasProvidedbyInstructor RSM336FinalWinter2023

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    emily y
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    This 3-page document provides formulas for calculating the optimal allocation of assets in a portfolio under different scenarios. It includes formulas for determining the optimal weight of a risky asset given a utility function, calculating the minimum variance portfolio of two risky assets, finding the optimal portfolio of two risky assets, and computing the expected return and variance of a portfolio with n securities.

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    FormulasProvidedbyInstructor-RSM336FinalWinter2023

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    This 3-page document provides formulas for calculating the optimal allocation of assets in a portfolio under different scenarios. It includes formulas for determining the optimal weight of a risky asset given a utility function, calculating the minimum variance portfolio of two risky assets, finding the optimal portfolio of two risky assets, and computing the expected return and variance of a portfolio with n securities.

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    8 views3 pages

    FormulasProvidedbyInstructor RSM336FinalWinter2023

    Uploaded by

    emily y
    This 3-page document provides formulas for calculating the optimal allocation of assets in a portfolio under different scenarios. It includes formulas for determining the optimal weight of a risky asset given a utility function, calculating the minimum variance portfolio of two risky assets, finding the optimal portfolio of two risky assets, and computing the expected return and variance of a portfolio with n securities.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    of 3

    Formulas provided by the Instructor (3 pages)

    Utility function:

    Optimal allocation weight w for a risky asset, given the utility function:

    Minimum Variance Portfolio of Two Risky Assets

     E 2 − Cov(rD , rE )
    wD = 2
     D +  E 2 − 2Cov(rD , rE )

    Optimal Portfolio of Two Risky Assets

    ( E (rD ) − r f ) E2 − ( E (rE ) − r f )Cov(rD , rE )


    wD =
    ( E (rD ) − r f ) E2 + ( E (rE ) − r f ) D2 − ( E (rD ) − r f + E (rE ) − r f )Cov(rD , rE )

    Expected Return and Variance for an n-security portfolio

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