What This Document Is
This document contains worked solutions to Assignment 2 for FINCUB 002, Foundations of Finance at New York University, taught by Professor Alexi Savov. It focuses on applying portfolio theory concepts, specifically with two risky assets and the inclusion of a riskless asset. The assignment covers calculations related to expected returns, standard deviations, and portfolio weights.
Why This Document Matters
This solutions document is intended for students enrolled in FINCUB 002 who have completed Assignment 2. It serves as a check for understanding and a resource for reviewing the application of portfolio theory principles. Students can use it to identify areas where they may have struggled with the assignment and to reinforce their grasp of the core concepts. It’s most valuable *after* a student has attempted the assignment independently.
Common Limitations or Challenges
This document provides solutions, but it does not offer detailed explanations of the underlying financial theory. It assumes a foundational understanding of expected return, standard deviation, correlation, and portfolio construction. It will not teach the concepts themselves; it only demonstrates their application to specific problems. Relying solely on the solutions without attempting the problems first will hinder learning.
What This Document Provides
The full document includes:
* Detailed calculations for portfolio expected returns and standard deviations with two risky assets.
* A prompt to complete a mean-standard deviation frontier graph (the graph itself is not provided).
* Analysis of portfolio efficiency and investor preferences.
* Solutions for portfolio construction involving a risk-free asset, including calculations of expected return and standard deviation for various asset allocations.
* Solutions for scenarios involving borrowing at the risk-free rate.
* Calculations related to portfolio risk and return with multiple funds (Russell, Windsor, and S&P).
This preview does *not* include the completed mean-standard deviation frontier graph, nor does it provide step-by-step explanations of the calculations. It only outlines the topics covered and the types of problems solved within the full document.
