Question: Question 6. (15 points) Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an expected return of

Question 6. (15 points) Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an expected return of 18% and a standard deviation of 60%. The correlation coefficient between Stocks A and B is 0.2. Stock A has a beta of .85 and Stock B has a beta of 1.20. Portfolio is invested 30% in Stock A and 70% in Stock B.

a. Calculate the expected return of the portfolio.

b. Calculate the standard deviation of the portfolio.

c. Calculate the beta of the portfolio

d. Is your portfolio less risky or more risky than the market? Explain.

e. Will your portfolio likely outperform or underperform the market in a period when stocks are rapidly falling in value? Why?

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!

Question 6. (15 points) Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an expected return of 18% and a standard deviation of 60%. The correlation coefficient...

4. (4 Points) Stock X has an expected return of 12% and the standard deviation of the expected return is 20%. Stock Z has an expected return of 7% and the standard deviation of the expected return is...

Question 6. (15 points) Stock A has an expected return of 10% and a standard deviation of 30%. Stock B has an expected return of 13% and a standard deviation of 45%. The correlation coefficient...

dontt use excel please Question 7 1.5 Points Security M has an expected return of 14% and a standard deviation of 14%. Security S has an expected return of 18% and a standard deviation of 31.43%. If...

dont use excel please Question 7 1.5 Points Security M has an expected return of 14% and a standard deviation of 14%. Security S has an expected return of 18% and a standard deviation of 31.43%. If...

Question 7 1 pts Use the following information to answer questions 5-8. Popular Automobiles arm headquartered in the United States, wants to apply the NPV method to value its first foreign project in...

Stock X has an expected return of 12% and the standard deviation of the expected return is 20%. Stock Z has an expected return of 7% and the standard deviation of the expected return is 15%. The...

7-12 Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an Two Asset Portfolio expected return of 18% and a standard deviation of 60%. The correlation coefficient...

atermediate Problems 3-4 (3-3) Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an expected return of 18% and a standard deviation of 60%. The...

On May 1, Blue Sky Flying School, a company that provides flying lessons, was started with an investment of $45,000 cash in the business. Following are the assets and liabilities of the company on...

Historically, U . S . banks were prohibited from each of a ) through d ) EXCEPT engaging in investment banking activities making a market in equity securities owning stock for their own account...

Exercise 11-15 (Algo) Dropping or Retaining a Segment [LO11-2] Thalassines kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line...