Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

8. A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of

8. A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.65. The expected returns and standard deviations of the two stocks are given in the following table below:

a. What is the expected return of the hedge fund's portfolio? (Round to two decimal places.)

b. What is the standard deviation of the hedge fund's portfolio? (Round to two decimal places.)

image text in transcribed

A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.65 . The expected returns and standard deviations of the two stocks are given in the following table: a. What is the expected return of the hedge fund's portfolio? b. What is the standard deviation of the hedge fund's portfolio? Data table (Click on the following icon in order to copy its contents into a spreadsheet.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals of Investment Management

Authors: Geoffrey Hirt, Stanley Block

10th edition

0078034620, 978-0078034626

More Books

Students also viewed these Finance questions