Question: 2. Portfolio Return and Standard Deviation. You are considering building an investment portfolio with two stocks, ABC and XYZ. ABC will equal 30% of the
2. Portfolio Return and Standard Deviation. You are considering building an investment portfolio with two stocks, ABC and XYZ. ABC will equal 30% of the dollar value of the portfolio, and XYZ will equal 70% of the dollar value. The expected returns over the next 5 years are shown below. a) Calculate the expected portfolio return, rp, for each of the five years. b) Calculate the expected value of the portfolio returns over the 5-year period c) Calculate the standard deviation of expected portfolio returns, over the 5-year period d) How would you characterize the correlation of returns of these two stocks? e) Have you achieved any benefits from diversification through this portfolio? Explain
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