SOA Exam P Sample Question 458
Study guide: Exam P-1
An investor wants to purchase a total of ten units of two assets, A and B, with annual payoffs per unit purchased of X and Y, respectively. Each asset has the same purchase price per unit. The payoffs are independent random variables with equal expected values and with \text{Var}(X) = 30 and \text{Var}(Y) = 20.
Calculate the number of units of asset A the investor should purchase to minimize the variance of the total payoff.
- A)
0 - B)
2 - C)
4 - D)
5 - E)
6
Answer this question and see the worked solution
Concepts tested
- Linear Combinations of Random Variables
- Variance and Standard Deviation
- Independent Random Variables