Question
Consider the following expected annual returns and standard deviations: Stock Expected Return Standard Deviation Boeing 5.5% 12.9% Nordstrom 7.2% 14.5% What would be the one-year
Consider the following expected annual returns and standard deviations:
Stock | Expected Return | Standard Deviation |
Boeing | 5.5% | 12.9% |
Nordstrom | 7.2% | 14.5% |
What would be the one-year expected return and standard deviation of a portfolio that consists of 1,000 shares of Boeing and 5,000 shares of Nordstrom stocks? Boeing trades at $221.24 a share and Nordstrom trades at $31.47 a share as of today. Suppose the correlation coefficient between the annual stock returns of the two companies is 0. Use the information provided in Question 8. Compute the Sharpe Ratio for each of the following three assets: (1) the Boeing stock; (2) the Nordstrom stock; (3) the portfolio discussed in Question 8. Use 1.2% as the risk free rate.
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