Portfolio return and standard deviation Personal Finance Problem Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 25% of the dollar value of the portfolio, and stock M will account for the other 75%. The historical returns over the next 6 years, 2013-2018, for each of these stocks are shown in the following table: a. Calculate the actual portfolio return, rp, for each of the 6 years. b. Calculate the expected value of portfolio returns, ip, over the 6-year period. c. How would you characterize the correlation of returns of the two stocks L and M? d. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio. The actual portfolio return for year 2014 is %. (Round to two decimal places.) The actual portfolio return for year 2015 is %. (Round to two decimal places.) Data Table The actual portfolio return for year 2016 is %. (Round to two decimal places.) The actual portfolio return for year 2017 is %. (Round to two decimal places.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) The actual portfolio return for year 2018 is %. (Round to two decimal places.) b. The expected value of portfolio returns, ip, over the 6-year period is %. (Round to two decimal places.) c. How would you characterize the correlation of returns of the two stocks L and M? (Select the best answer below.) Year 2013 2014 2015 2016 2017 2018 Expected return Stock L Stock M 15% 24% 16% 22% 17% 20% 17% 18% 18% 16% 19% 14% O A. The assets are negatively correlated. OB. The assets are positively correlated. d. Discuss any benefits diversification achieved by Jamie through creation of the portfolio. (Select the best answer below.) Print Done O A. Combining these two negatively correlated assets reduces overall portfolio risk. O B. Combining these two negatively correlated assets increases overall portfolio risk. O C. Combining these two positively correlated assets reduces overall portfolio risk. OD. Combining these two positively correlated assets increases overall portfolio risk. Portfolio return and standard deviation Personal Finance Problem Jamie Wong is thinking of building an investment portfolio containing two stocks, L and M. Stock L will represent 25% of the dollar value of the portfolio, and stock M will account for the other 75%. The historical returns over the next 6 years, 2013-2018, for each of these stocks are shown in the following table: a. Calculate the actual portfolio return, rp, for each of the 6 years. b. Calculate the expected value of portfolio returns, ip, over the 6-year period. c. How would you characterize the correlation of returns of the two stocks L and M? d. Discuss any benefits of diversification achieved by Jamie through creation of the portfolio. The actual portfolio return for year 2014 is %. (Round to two decimal places.) The actual portfolio return for year 2015 is %. (Round to two decimal places.) Data Table The actual portfolio return for year 2016 is %. (Round to two decimal places.) The actual portfolio return for year 2017 is %. (Round to two decimal places.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) The actual portfolio return for year 2018 is %. (Round to two decimal places.) b. The expected value of portfolio returns, ip, over the 6-year period is %. (Round to two decimal places.) c. How would you characterize the correlation of returns of the two stocks L and M? (Select the best answer below.) Year 2013 2014 2015 2016 2017 2018 Expected return Stock L Stock M 15% 24% 16% 22% 17% 20% 17% 18% 18% 16% 19% 14% O A. The assets are negatively correlated. OB. The assets are positively correlated. d. Discuss any benefits diversification achieved by Jamie through creation of the portfolio. (Select the best answer below.) Print Done O A. Combining these two negatively correlated assets reduces overall portfolio risk. O B. Combining these two negatively correlated assets increases overall portfolio risk. O C. Combining these two positively correlated assets reduces overall portfolio risk. OD. Combining these two positively correlated assets increases overall portfolio risk