Given two stocks with E(r1) = 10%, E(r2) = 12%, 01 = 18%, 02 = 22%....
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Given two stocks with E(r1) = 10%, E(r2) = 12%, 01 = 18%, 02 = 22%. Calculate the expected returns and standard deviations of a two-stock portfolio under each of the following conditions: (a) w1 = 0.80,w2 = 0.20, p = 0.6; (5 marks) (b) w1 = 0.60,w2 = 0.40, p = 0; (5 marks) (c) w1 = 0.20,w2 = 0.80, p = -0.6. (5 marks) Here wi is the weight of stock i in the portfolio, p is the correlation between the two stock returns. Given two stocks with E(r1) = 10%, E(r2) = 12%, 01 = 18%, 02 = 22%. Calculate the expected returns and standard deviations of a two-stock portfolio under each of the following conditions: (a) w1 = 0.80,w2 = 0.20, p = 0.6; (5 marks) (b) w1 = 0.60,w2 = 0.40, p = 0; (5 marks) (c) w1 = 0.20,w2 = 0.80, p = -0.6. (5 marks) Here wi is the weight of stock i in the portfolio, p is the correlation between the two stock returns.
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