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Analyzing portfolio risk and return involves the understanding of expected returns from a portfolio. Consider the following case: Andre is an amateur investor who holds
Analyzing portfolio risk and return 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: Standard Percentage of Portfolio Expected Return Stock Deviation Artemis Inc. 20% 8.00% 24.00% Babish & Co. 30% 14.00% 28.00% Cornell Industries 35% 11.00% 31.00% Danforth Motors 15% 3.00% 33.00% What is the expected return of Andre's stock portfolio? 13.64% 10.10% 15.15% 7.58% Suppose each stock in the preceding portfolio has a correlation coefficient of 0.4 (p = 0.4) with each of the other stocks. If the weighted average of the risk (standard deviation) of the individual securities in the partially diversified portfolio of four stocks is 29%, the portfolio's standard deviation (op) most likely is 29%. less than more than equal to
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