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Consider the following expected returns, volatilities, and correlations: Stock Expected Return Standard Deviation Correlation with Microsoft Correlation with Wal-Mart Microsoft 44% 24% 1.0 0.7 Wal-Mart
Consider the following expected returns, volatilities, and correlations: | |||||
Stock | Expected Return | Standard Deviation | Correlation with Microsoft | Correlation with Wal-Mart | |
Microsoft | 44% | 24% | 1.0 | 0.7 | |
Wal-Mart | 23% | 14% | 0.7 | 1.0 |
Consider a portfolio consisting of Microsoft and Wal-Mart. Calculate the expected return on such a portfolio when the weight on Microsoft stock is 0%, 25%, 50%, 75%, and 100%.
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