Question
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
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:
| Stock | Percentage of Portfolio | Expected Return | Standard Deviation |
|---|---|---|---|
| Artemis Inc. | 20% | 8.00% | 27.00% |
| Babish & Co. | 30% | 14.00% | 31.00% |
| Cornell Industries | 35% | 13.00% | 34.00% |
| Danforth Motors | 15% | 5.00% | 36.00% |
What is the expected return on Andres stock portfolio?
8.32%
14.99%
16.65%
11.10%
Suppose each stock in Andres portfolio has a correlation coefficient of 0.4 ( = 0.4) with each of the other stocks. If the weighted average of the risk of the individual securities (as measured by their standard deviations) included in the partially diversified four-stock portfolio is 32%, the portfolios standard deviation (pp) most likely is ___ 32%.
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Intermediate Accounting Reporting and Analysis
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
2nd edition
978-1285453828
