Question
6. You invest 66% of your money in Stock A and the rest in Stock B. The standard deviation of annual returns is 58% for
6. You invest 66% of your money in Stock A and the rest in Stock B. The standard deviation of annual returns is 58% for Stock A and 51% for Stock B. The covariance between the two stocks is 0.00. What is the standard deviation of annual returns for the combination of the two stocks? Go out three decimal places - for example, write 39.6% as .396.
7. You invest 49% of your money in Stock A and the rest in Stock B. The variance of annual returns is 38% for Stock A and 40% for Stock B. The correlation between the two stocks is -0.6. What is the standard deviation of annual returns for the combination of the two stocks? Go out three decimal places - for example, write 39.6% as .396.
8. Stock A's annual returns have a standard deviation of 37%. Stock B's annual returns have a standard deviation of 71%. The two stocks have a correlation of 0. Use calculus to find out what percentage of your money you should invest in Stock A in order to minimize the standard deviation of a portfolio of A and B. Go out four decimals - in other words, you should write 31.68% as .3168.
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