Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

An investor is considering to create a portfolio of two stocks, A (for airline) and E (for energy). Based on data of past two years,

An investor is considering to create a portfolio of two stocks, A (for airline) and E (for energy). Based on data of past two years, each stock is represented by a rate of return mean and standard deviation of the rates of return as follows:

Mean Standard Deviation

Stock A 8% 10%

Stock E 14% 20%

The correlation coefficient between these two stocks is calculated as -0.8. If the investor chooses to split his money on these two stocks as 50% each, what will be the expected mean and standard deviation of his portfolio?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

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

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

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

Get Started

Students also viewed these Finance questions