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A portfolio is invested 40 percent in Stock G and 60 percent in Stock J. The expected returns on these stocks are 10 percent and
A portfolio is invested 40 percent in Stock G and 60 percent in Stock J. The expected returns on these stocks are 10 percent and 15 percent respectively. The standard deviation of these stocks are 10% and 18% and the correlation coefficient between the two stocks is 0.25.
- What is the portfolio's expected return?
- What is the portfolios expected risk?
- Is there any benefit of combining the two stocks? Or will individual stocks provide better risk adjusted returns?
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