Question: To achieve a zero standard deviation for a portfolio, calculate the weights of stock A and stock B, assuming the correlation coefficient is 1. Use
To achieve a zero standard deviation for a portfolio, calculate the weights of stock A and stock B, assuming the correlation coefficient is 1. Use the following information. (Round intermediate calculations to 4 decimal places, e.g. 31.2125 and the final answers to 2 decimal places, e.g. 31.21%.)
| State of the economy | Probability of occurrence | Expected return on stock A in this state | Expected return on stock B in this state | |||
| High growth | 25% | 43.0% | 58.0% | |||
| Moderate | 20% | 23.0% | 28.0% | |||
| Recession | 55% | -13.0% | -23.0% |
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