(24-9) Feasible Portfolios Start with the partial model in the file Ch24 P09 Build a Model.xls from...

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Feasible Portfolios Start with the partial model in the file Ch24 P09 Build a Model.xls from the textbook’s Web site. Following is information for the required returns and standard deviations of returns for A, B, and C:

The correlation coefficients for each pair are shown below in a matrix, with each cell in the matrix giving the correlation between the stock in that row and column. For Historical Rates of Return Year NYSE Stock Y 1 4.0% 3.0%

2 14.3 18.2 3 19.0 9.1 4 −14.7 −6.0 5 −26.5 −15.3 6 37.2 33.1 7 23.8 6.1 8 −7.2 3.2 9 6.6 14.8 10 20.5 24.1 11 30.6 18.0 Mean = 9.8% 9.8%

σ = 19.6% 13.8%

Stock ri σi A 7.0% 33.11%

B 10.0 53.85 C 20.0 89.44 resource example, ρAB = 0.1571 is in the row for A and the column for B. Notice that the diagonal values are equal to 1 because a variable is always perfectly correlated with itself.

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Financial Management Theory And Practice

ISBN: 9781439078105

13th Edition

Authors: Eugene F. Brigham, Michael C. Ehrhardt

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