Question

You are given the following data on several stocks:
a. Calculate the expected return and standard deviation for each stock.
b. Calculate the expected return and standard deviation for a portfolio invested equally in Gere Mining and Reubenfeld Films. How does the standard deviation of this portfolio compare to a simple 50-50 weighted average of the standard deviations of the two stocks?
c. Calculate the expected return and standard deviation for a portfolio invested equally in Gere Mining and DeLorean Automative. How does the standard deviation of this portfolio compare to a simple 50-50 weighted average of the standard deviations of the two stocks?
d. Explain why your answers regarding the portfolio standard deviations are so different in parts b and c.


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  • CreatedMarch 26, 2015
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