Suppose Tex stock has a volatility of 36%, and Mex stock has a volatility of 18%. If

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Suppose Tex stock has a volatility of 36%, and Mex stock has a volatility of 18%. If Tex and Mex are uncorrelated,

a. Construct a portfolio with positive weights in both stocks and that has the same volatility as MEX alone.

b. What portfolio of the two stocks has the smallest possible volatility?

Suppose that the average stock has a volatility of 46%, and that the correlation between pairs of stocks is 23%. Estimate the volatility of an equally weighted portfolio with:

a. 1 stock

b. 30 stocks

c. 1,000 stocks

Related Book For answer-question

Corporate Finance

ISBN: 978-0134083278

4th edition

Authors: Jonathan Berk, Peter DeMarzo

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Posted Date: Aug 21, 2020 05:00 AM

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Suppose Tex stock has a volatility of 36%, and Mex stock has a volatility of 18%. If

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Expert Answer:

a As both stocks are uncorrelated Std Dev of the portfolio w1 x SD12 ... View the full answer

Corporate Finance

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