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Assume that you decide to form an equal - weighted portfolio including only those two stocks. Stock A Expected annual rate of return 8 %
Assume that you decide to form an equalweighted portfolio including only those two stocks.
Stock A
Expected annual rate of return
Expected annual standard deviation
Stock B
expected annual rate of return expected annual standard deviation
Calculate the expected standard deviation of your portfolio, corresponding to each scenario with regard to the correlation coefficient between stock A and stock B ie when rho or
If rho what is the standard deviation of the portfolio which invests in stock A in stock B and in a riskfree asset?
If rho given that of the total investment is financed by borrowing at the riskfree rate, what is the standard deviation of the portfolio which invests equally in stock A and B
If rho what combination of stock A and stock B offers the minimum risk?
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