Stock A and B have the following returns: _________________ Stock A _______________ Stock B 1 .......................... 0.10
Question:
Stock A and B have the following returns:
_________________ Stock A _______________ Stock B
1 .......................... 0.10 ........................... 0.06
2 .......................... 0.07 ........................... 0.02
3 .......................... 0.15 ............................ 0.05
4 ......................... - 0.05 ............................ 0.01
5 .......................... 0.08 .......................... - 0.02
a. What are the expected returns of the two stocks?
b. What are the standard deviations of the two stocks?
c. If their correlation is 0.46, what is the expected return and standard deviation of a portfolio of 40% stock A and 60% stock B?
Expected ReturnThe expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
Step by Step Answer:
Plan Use Equations 103 to 105 to answer parts a and b Use Equations 113 and 114 to answer part c Ex...View the full answer
Fundamentals of Corporate Finance
ISBN: 978-0133400694
1st canadian edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi
