Question
A portfolio consists of two stocks: Stock Expected Standard Beta Weight Return Deviation X 8.85% 5.9% 1.2x 30% Y 10.3% 5.75% 1.8x 70% The correlation
A portfolio consists of two stocks:
Stock Expected Standard Beta Weight Return Deviation
X 8.85% 5.9% 1.2x 30%
Y 10.3% 5.75% 1.8x 70%
The correlation between the two stocks returns is 0.40.
Required:
(a) (5 marks) Calculate the expected return, standard deviation, and Beta of the portfolio
(b) (3 marks) Given that the risk free rate is 2% and the expected market rate is 9%, would you invest in this portfolio? Why?
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The Handbook Of Equity Derivatives
Authors: Jack Clark Francis, William W. Toy, J. Gregg Whittaker
1st Edition
0471326038, 978-0471326038
