FinCorp Inc. is exploring the risk of different portfolio allocations between two stocks. Complete the followingtable. Case
Question:
FinCorp Inc. is exploring the risk of different portfolio allocations between two stocks. Complete the followingtable.
Case Case 2 Weight in stock 1 Weight in stock 2 Standard deviation of stock 1 | Standard deviation of stock 2 | Covariance between stocks 1 and 2 Correlation between stocks 1 and 2 Portfolio variance Portfolio standard deviation 35% 40% 3% 20% 0.022 25% 0.027 26%
Step by Step Answer:
Case 1 Case 2 Weight in stock 1 35 40 Weight in sto...View the full answer
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
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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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