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Ch18-Risk Control-Back ques

Discussion in 'SP5' started by Nimisha, Apr 6, 2020.

  1. Nimisha

    Nimisha Very Active Member

    Hi
    I would be grateful if someone could explain on how Variance of A and Variance of B has been calculated in the formula for minimum variance portfolio proportions in Ques 18.3,pg 29 of Ch 18 .
     
    Nimisha, Apr 6, 2020
    #1
  2. Colin McKee

    Colin McKee ActEd Tutor Staff Member

    I am not sure I understand the question. In Q18.3 you are given the standard deviation of all three assets, those being 10%, 5% and 5%. the variances used in the solution are simply the square of those standard deviations. (It is possible that you may be looking at an older set of notes as there was an errata on that question prior to the latest course notes. the standard deviation column was missing from the question, making it impossible to solve).
     
    Colin McKee, Apr 6, 2020
    #2
  3. Nimisha

    Nimisha Very Active Member

    Hi Colin
    Thank you for replying.I am using the latest course notes but still the question only has the Annual returns of the 3 asset classes 10%,7%,5% ,the risk free rate=4% and the asset class correlations matrix.I don't see any column of standard deviation in the question.
     
    Nimisha, Apr 8, 2020
    #3
  4. Gresham Arnold

    Gresham Arnold ActEd Tutor Staff Member

    Hi Nimisha

    Apologies, can I just check, do you definitely have the Course Notes for the 2020 exams? This sounds remarkably like an error that was in this question in the Course Notes for the 2019 exams. We issued a correction; click here for the relevant page on our website and then download the SP5 corrections doc for the 2019 materials. I hope that sorts this out for you? Apologies for the confusion.

    Best wishes
    Gresham
     
    Gresham Arnold, Apr 9, 2020
    #4
  5. Nimisha

    Nimisha Very Active Member

    Hi
    Yes,I just checked its the 2019 study material.Thanks for clearing this,I was unnecessarily getting worried else.
    Regards
     
    Nimisha, Apr 9, 2020
    #5

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