Question: A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel

A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.65.

The expected returns and standard deviations of the two stocks are given in the following table:

Expected Return (%) Standard Deviation (%)
Oracle 12 45
Intel 14.5 40

a. What is the expected return of the hedge fund's portfolio?

b. What is the standard deviation of the hedge fund's portfolio?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

8 . A hedge fund has created a portfolio using just two stocks. It has shorted 3 5 , 0 0 0 , 0 0 0 worth of Oracle stock and has purchased 8 5 , 0 0 0 , 0 0 0 of Intel stock. The correlation between...

Q:

8 . A hedge fund has created a portfolio using just two stocks. It has shorted 3 5 , 0 0 0 , 0 0 0 worth of Oracle stock and has purchased 8 5 , 0 0 0 , 0 0 0 of Intel stock. The correlation between...

Q:

A hedge fund has created a portfolio using just two stocks. It has shorted $36,000,000 worth of Oracle stock and has purchased $95,000,000 of Intel stock. The correlation between Oracles and Intels...

Q:

A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracles and Intels...

Q:

A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracles and Intels...

Q:

hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracles and Intels...

Q:

A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracles and Intels...

Q:

A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracles and Intels...

Q:

A hedge fund has created a portfolio using just two stocks. It has shorted USD 35,000,000 worth of GE stock and has purchased USD85,000,000 of Intel stock. The correlation be- tween GE and Intel...

Q:

26. A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracles and...

Q:

Suppose that you are the manager of a dedicated short bias hedge fund with NAV of $100M. You sell short 10 stocks, with a short position of $20M for each of them. Specifically, you borrow the shares...

Q:

Janie graduates from high school in 2023 and enrolls in college in the fall. Her parents (who file a joint return) pay $10,975 for her tuition and fees. If required, round your computations to the...

Q:

In 2 0 2 4 , unreimbursed expenses of employees are considered to be deductions:

Q:

On 1 March 2007 DB Limited issued R560 000 15% debentures at R98. The debentures were to be redeemed at par in four equal annual payments starting 28 February 2010. Required: Journalise the above...