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Abc has an expected return of 20% yz has an expected return of 12% relation coefficient between the 10) You hold a portfolio consisting of
Abc has an expected return of 20% yz has an expected return of 12% relation coefficient between the 10) You hold a portfolio consisting of two stocks. Stock Abc has an expected retur and a standard deviation of returns of 25%. Stock Xyz has an expected retu and a standard deviation of returns of 10%. The correlation coefficient de stock returns of Abc and Xyz is 0.3. Stock Abc comprises 60% of the portfolio, while stock orises 60% of the portfolio, while stock Xyz comprises 40% of the portfolio a. What is the expected return of your portfolio? (5 points) b. What is the standard deviation of returns for your portfolio? (5 points) c. How would your answer in b) change if the correlation coefficient was 0.6 (instead of 0.3)? You do not need to provide an actual number - just answer whether the standard deviation would go up, stay the same, or go down. Please explain your answer for full credit. (3 points) d. How would your answer in b) change if you added four more stocks to your portfolio? You do not need to provide an actual number - just answer whether the standard deviation would go up, stay the same, or go down. Please explain your answer for full credit. (4 points) Abc has an expected return of 20% yz has an expected return of 12% relation coefficient between the 10) You hold a portfolio consisting of two stocks. Stock Abc has an expected retur and a standard deviation of returns of 25%. Stock Xyz has an expected retu and a standard deviation of returns of 10%. The correlation coefficient de stock returns of Abc and Xyz is 0.3. Stock Abc comprises 60% of the portfolio, while stock orises 60% of the portfolio, while stock Xyz comprises 40% of the portfolio a. What is the expected return of your portfolio? (5 points) b. What is the standard deviation of returns for your portfolio? (5 points) c. How would your answer in b) change if the correlation coefficient was 0.6 (instead of 0.3)? You do not need to provide an actual number - just answer whether the standard deviation would go up, stay the same, or go down. Please explain your answer for full credit. (3 points) d. How would your answer in b) change if you added four more stocks to your portfolio? You do not need to provide an actual number - just answer whether the standard deviation would go up, stay the same, or go down. Please explain your answer for full credit. (4 points)
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