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Bonus (4 Marks) Assume the following statistics for Stocks A, B, and C: Stock A 20.0% 23.2% Stock C 10.0% 19.5% Stock B Expected return
Bonus (4 Marks) Assume the following statistics for Stocks A, B, and C: Stock A 20.0% 23.2% Stock C 10.0% 19.5% Stock B Expected return Standard deviation 14,0% 13.6% The correlation coefficients between the three stocks are: Stock A Stock B Stock C Stock A Stock B 0.286 Stock C 0.132 0.605 1. An investor seeks a portfolio return of 12 percent. Which combinations of the three stocks accomplish this objective? Which of those combinations achieves the least amount of risk? 2. An investorseeks a maximum variance of the portfolio of 1 percent. Which combinations of the three stocks accomplish this objective? Which of those combinations achieves the highest expected return? Equation Needed: )- ). !3! , - .g, where x, proportion of portfolio invested in security i and where x= proportion of total investment in Security i P- correlation coefficient between Bonus (4 Marks) Assume the following statistics for Stocks A, B, and C: Stock A Stock C Stock B 10.0% 19.5% 14,0% 13.6% Expected return Standard deviation 20.0% 23.2% The correlation coefficients between the three stocks are: Stock A Stock C Stock B Stock A 0.286 Stock B Stock C 0.605 0.132 1. An investor seeks a portfolio return of 12 percent. Which combinations of the three stocks accomplish this objective? Which of those combinations achieves the least amount of risk? 2. An investorseeks a maximum variance of the portfolio of 1 percent. Which combinations of the three stocks accomplish this objective? Which of those combinations achieves the highest expected return? Equation Needed: Ei-&. %3D ,, proportion of portfolio. invested in security i and where x where x= proportion of total investment in Security i correlation coefficient between
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