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A collection of financial assets and securities is referred to as a portfolio. Most individunts and institutions Invest in a portfolio, making portfolio risk analysis

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A collection of financial assets and securities is referred to as a portfolio. Most individunts and institutions Invest in a portfolio, making portfolio risk analysis an Integral part of the field of finance. Just like stand-alone assets and securities, portfolios are also exposed to risk. Portfolio risk refers to the possibility that an investment portfolio will not generate the investor's expected rate of return, Analyzing portfolio risk and retum involves 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: Stock Percentage of Portfolio 20% Standard Deviation 30.009 Expected Return 6.00% 14.00 13.00 30% Artemis Inc Babish Co. Cornell Industries Danforth Motors 34,00 35% 15% 37.0094 39.0096 5.00% What is the expected return on Andre's stock portfolio? 14.45% 10.70% 08.03 16.05% 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: Stock Percentage of Portfolio Artemis Inc. 20% Babish & Co. 30% Expected Return Standard deviation 6.00% 30.00% 14.00% 34.00% 13.00% 37.00% 5.00% 39.00% Comell Industries 35% Danforth Motors 15% What is the expected return on Andre's stock portfolio? 14,45% 10.70% 0.8.03% O 16.05% Suppose cach stock in Andre's portfolio has a correlation coefficient of 0.4 (p = 0.4) with each of the other stocks. If the weighted average of the risk of the individual securities (as measured by their standard deviations) included in the partially diversified four stock portfolio is 35%, the portfolio's standard deviation () most likely is 35%

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