Question
1. Analyzing portfolio risk and return involve the understanding of expected returns from a portfolio. Consider the following case: Andre is an amateur investor who
1. Analyzing portfolio risk and return involve the understanding of expected returns from a portfolio. Consider the following case: Andre is an amateur investor who holds a small portfolio consisting of only four stocks.The stock holdings in his portfolio are shown in the following table: Artemis (20% of portfolio, 8.00% expected return, 28.00% standard deviation) Babish & Co. (30% of portfolio, 14.00% expected return, 32.00% standard deviation) Cornell Industries (35% of portfolio, 12.00% expected return, 35.00 standard deviation) Danforth Motors (15% of portfolio, 3.00% expected return, 37.00% standard deviation) What is the expected return of Andre's stock portfolio? a. 15.68, b. 10.45, c. 14.11 d. 7.84 Suppose each stock in the preceding portfolio has a correlation coefficient of 0.4 (p=0.4) with each of the other stocks. If the weighted average of the risk (standard deviation) of the individual securities in the partially diversified portfolio of four stocks is 33%, the portfolio's standard deviation most likely is ________ 33%. a. equal to, b. more than, c. less than
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