Question: Problem 6-06 Given: E ( R 1 ) = 0.13 E ( R 2 ) = 0.18 E ( 1 ) = 0.04 E (

Problem 6-06

Given:

E(R1) = 0.13

E(R2) = 0.18

E(1) = 0.04

E(2) = 0.06 Calculate the expected returns and expected standard deviations of a two-stock portfolio having a correlation coefficient of 0.65 under the conditions given below. Do not round intermediate calculations. Round your answers to four decimal places.

What is?...

  1. w1 = 1.00
  2. Expected return of a two-stock portfolio:
  3. Expected standard deviation of a two-stock portfolio:
  4. w1 = 0.70
  5. Expected return of a two-stock portfolio:
  6. Expected standard deviation of a two-stock portfolio:
  7. w1 = 0.50
  8. Expected return of a two-stock portfolio:
  9. Expected standard deviation of a two-stock portfolio:
  10. w1 = 0.25
  11. Expected return of a two-stock portfolio:
  12. Expected standard deviation of a two-stock portfolio:
  13. w1 = 0.10
  14. Expected return of a two-stock portfolio:
  15. Expected standard deviation of a two-stock portfolio:

Choose the correct risk-return graph for weights from parts (a) through (e) when ri,j = -0.65; 0.00; 0.65.

The correct graph is

.

A. B. C. D.

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