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Consider shares in two companies, X and Y, as follows: E(Ri) Qi Share x 10% 20% Share Y 30% 50% The correlation between X and
Consider shares in two companies, X and Y, as follows:
E(Ri) | Qi | |
Share x | 10% | 20% |
Share Y | 30% | 50% |
The correlation between X and Y (i.e. XY) = 0.4
(a)What is the expected return and standard deviation of a portfolio comprising 25% invested in share X and 75% invested in share Y?
(b)Recalculate the portfolios expected return and standard deviation assuming equal weights in X and Y.
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