1. A portfolio consists of two stocks: (6 marks) Stock Expected Return Standard Deviation Weight Stock...

 

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1. A portfolio consists of two stocks: (6 marks) Stock Expected Return Standard Deviation Weight Stock 1 13% Stock 2 15% 19% 25% 0.40 ??? The correlation between the two stocks' return is 0.10 (a) Calculate the expected return and standard deviation of the portfolio. Expected Return: Standard Deviation: (b) (i) Briefly explain, in general, when there would be "benefits of diversification" (for any portfolio of two securities). (ii) Describe whether the above portfolio would exhibit "benefits of diversification" (and why). [No calculations are required.] (c) Show your calculations re: whether the above portfolio exhibits "benefits of diversification" and indicate whether it does/doesn't (and why). 1. A portfolio consists of two stocks: (6 marks) Stock Expected Return Standard Deviation Weight Stock 1 13% Stock 2 15% 19% 25% 0.40 ??? The correlation between the two stocks' return is 0.10 (a) Calculate the expected return and standard deviation of the portfolio. Expected Return: Standard Deviation: (b) (i) Briefly explain, in general, when there would be "benefits of diversification" (for any portfolio of two securities). (ii) Describe whether the above portfolio would exhibit "benefits of diversification" (and why). [No calculations are required.] (c) Show your calculations re: whether the above portfolio exhibits "benefits of diversification" and indicate whether it does/doesn't (and why).