# Question

Arbor Systems and Gencore stocks both have a volatility of 40%. Compute the volatility of a portfolio with 50% invested in each stock if the correlation between the stocks is

(a) +1,

(b) 0.50,

(c) 0,

(d) -0.50, and

(e) -1.0.

In which cases is the volatility lower than that of the original stocks?

(a) +1,

(b) 0.50,

(c) 0,

(d) -0.50, and

(e) -1.0.

In which cases is the volatility lower than that of the original stocks?

## Answer to relevant Questions

Suppose Wesley Publishing’s stock has a volatility of 60%, while Addison Printing’s stock has a volatility of 30%. If the correlation between these stocks is 25%, what is the volatility of the following portfolios of ...You currently hold a portfolio of three stocks, Delta, Gamma, and Omega. Delta has a volatility of 60%, Gamma has a volatility of 30%, and Omega has a volatility of 20%. Suppose you invest 50% of your money in Delta, and 25% ...Suppose Target’s stock has an expected return of 20% and a volatility of 40%, Hershey’s stock has an expected return of 12% and a volatility of 30%, and these two stocks are uncorrelated. a. What is the expected return ...What is the risk premium of a zero-beta stock? Does this mean you can lower the volatility of a portfolio without changing the expected return by substituting out any zero-beta stock in a portfolio and replacing it with the ...IDX Tech is looking to expand its investment in advanced security systems. The project will be financed with equity. You are trying to assess the value of the investment, and must estimate its cost of capital. You find the ...Post your question

0