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( Computing the standard deviation for a portfolio of two risky investments ) Mary Guilott recently graduated from Nichols State University and is anxious to
Computing the standard deviation for a portfolio of two risky investments Mary Guilott recently graduated from Nichols State University and is anxious to begin investing her meager savings as a way of applying what she has learned in business school. Specifically, she is evaluating an investment in a portfolio comprised of two firms' common stock. She has collected the following information about the common stock of Firm A and Firm B:
a If Mary invests half her money in each of the two common stocks, what is the portfolio's expected rate of return and standard deviation in portfolio return?
b Answer part a where the correlation between the two common stock investments is equal to zero.
c Answer part a where the correlation between the two common stock investments is equal to
d Answer part a where the correlation between the two common stock investments is equal to
e Using your responses to questions ad describe the relationship between the correlation and the risk and return of the portfolio
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