Suppose you have $20,000 in cash to invest. You decide to short sell $10,000 worth of...
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Suppose you have $20,000 in cash to invest. You decide to short sell $10,000 worth of Coca-Cola stock and invest the proceeds from your short sale, plus your $20,000, in Intel. The expected return of Intel stock is 26% while the expected return of Coca-Cola stock is 6%. The volatilities (standard deviations) of Intel and Coca-Cola stocks are 50% and 25%, respectively. The covariance between the Intel and and Coca- Cola stocks is 0. What is the volatility of your portfolio containing shares of Intel and Coca-Cola? (Hint: You can think of your short sale as a negative investment in Coca-Cola. Use 4 decimal places for your calculations.) А. 72.12%. В. 76.03%. C. 66.35%. D. 69.64%. E. none of the above. Suppose you have $20,000 in cash to invest. You decide to short sell $10,000 worth of Coca-Cola stock and invest the proceeds from your short sale, plus your $20,000, in Intel. The expected return of Intel stock is 26% while the expected return of Coca-Cola stock is 6%. The volatilities (standard deviations) of Intel and Coca-Cola stocks are 50% and 25%, respectively. The covariance between the Intel and and Coca- Cola stocks is 0. What is the volatility of your portfolio containing shares of Intel and Coca-Cola? (Hint: You can think of your short sale as a negative investment in Coca-Cola. Use 4 decimal places for your calculations.) А. 72.12%. В. 76.03%. C. 66.35%. D. 69.64%. E. none of the above.
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