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Consider two portfolios: Portfolio 1 has two stocks: Stock A has a standard deviation of 1 5 % per year with an expected return of
Consider two portfolios: Portfolio has two stocks: Stock A has a standard deviation of per year with an expected return of per year, and Stock B has a standard deviation of per year with an expected return of per year. The correlation between Stock A and Stock B is You have times as much of Stock B as you do of Stock A Portfolio has two stocks: Stock C has a standard deviation of per year with an expected return of per year, and Stock D has a standard deviation of per year with an expected return of per year. The correlation between Stock C and Stock D is You have times as much of Stock D as you do of Stock C I. What are your portfolio standard deviations? round to the nearest percent II Which portfolio exposes you to more risk per unit of return? round to three decimal places Multiple Choice I. Portfolio : ; Portfolio : II They are essentially equal in terms of risk per unit of return I. Portfolio : ; Portfolio : II Portfolio is less risky because it is more diversified I. Portfolio : ; Portfolio : II Portfolio is less risky because it is more concentrated I. Portfolio : ; Portfolio : II Portfolio is less risky because it is more diversified none of the other answers are correct I. Portfolio : ; Portfolio : II Portfolio is less risky because it is more diversified I. Portfolio : ; Portfolio : II They are essentially equal in terms of risk per unit of return
Consider two portfolios:
Portfolio has two stocks:
Stock A has a standard deviation of per year with an expected return of per year, and Stock B has a standard deviation of per year
with an expected return of per year. The correlation between Stock A and Stock B is You have times as much of Stock B
as you do of Stock A
Portfolio has two stocks:
Stock C has a standard deviation of per year with an expected return of per year, and Stock D has a standard deviation of per year
with an expected return of per year. The correlation between Stock C and Stock D is You have times as much of Stock D
as you do of Stock C
I. What are your portfolio standard deviations? round to the nearest percent
II Which portfolio exposes you to more risk per unit of return? round to three decimal places
Multiple Choice
I. Portfolio : ; Portfolio :
II They are essentially equal in terms of risk per unit of return
I. Portfolio : ; Portfolio :
II Portfolio is less risky because it is more diversified
I. Portfolio : ; Portfolio :
II Portfolio is less risky because it is more concentrated
I. Portfolio : ; Portfolio :
II Portfolio is less risky because it is more diversified
none of the other answers are correct
I. Portfolio : ; Portfolio :
II Portfolio is less risky because it is more diversified
I. Portfolio : ; Portfolio :
II They are essentially equal in terms of risk per unit of return
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