Suppose that Ms. Smart invests 25% of her portfolio in four different stocks. The mean and standard deviation of the annual return on each stock are shown in the first table below. The correlations between the annual returns on the four stocks are shown in the second table below.

Distributions of returns
	Mean	Stdev
Stock 1	8%	11%
Stock 2	6%	7%
Stock 3	10%	19%
Stock 4	9%	10%

Correlation matrix
	Stock 1	Stock 2	Stock 3	Stock 4
Stock 1	1.00	0.75	0.70	0.60
Stock 2	0.75	1.00	0.80	0.50
Stock 3	0.70	0.80	1.00	0.65
Stock 4	0.60	0.50	0.65	1.00

What is the mean percent return? Rounded to one decimal place

What is the probability that Mrs. Smart’s portfolio’s annual return will exceed 20%? Answer in a probability rounded to 2 decimal places. (Not a percentage.)

What is the probability that Mrs. Smart’s portfolio will lose money during the course of a year? Answer in a probability rounded to 2 decimal places. (Not a percentage.)

Answer rating: 100% (QA)

Solution 1 MEAN PERCENT RETURN825 STANDARD DEVIATION OF R... View the full answer