Suppose you created a two-stock portfolio by investing $50,000 in Alta Industries and $50,000 in Repo Men.
Question:
Suppose you created a two-stock portfolio by investing $50,000 in Alta Industries and $50,000 in Repo Men. (1) Calculate the expected return (r^ p), the standard deviation(σp), and the coefficient of variation (CVp) for this portfolio and fill in the appropriate blanks in the table. (2) How does the risk of this two-stock portfolio compare with the risk of the individual stocks if they were held in isolation?
Step by Step Answer:
To calculate the expected return rp standard deviation p and coefficient of variation CVp for a port...View the full answer
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
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