An investor has an equal amount invested in each of the following four securities _________________________________________________________ security expected annual rate of return W 0.1 X 0.12 Y 0.16 Z 0.22 ____________________________________________________________ the investor plans to sell security Y and use the proceeds to purchase a new security that has the same expected return as the current portfolio. The expected return for the investor’s new portfolio, compared to the current portfolio, will be A lower regardless of changes in the correlation of returns among securities B the same regardless of changes in the correlation of returns among securities C lower only if the correlation of the new security with securities W,X and Z is lower than the correlation of security Y D the same only if the correlation of the new security with securities W,X and Z is lower than the correlation of security Y

A) lower, because 0.15 (expected return of the portfolio) < 0.16 - expected return of Y

maratikus Wrote: ------------------------------------------------------- > A) lower, because 0.15 (expected return of the > portfolio) < 0.16 - expected return of Y E® is lower, but how about the weight, the weight does not change? how to calculate the weight?

I assume the weight is going to be the same: 1/4