Question
Hyacinth Macaw invests 54% of her funds in stock I and the balance in stock J. The standard deviation of returns on I is 15%,
| Hyacinth Macaw invests 54% of her funds in stock I and the balance in stock J. The standard deviation of returns on I is 15%, and on J it is 28%. |
| a. | Calculate the variance of portfolio returns, assuming the correlation between the returns is 1.0. (Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.) |
| Portfolio variance |
| b. | Calculate the variance of portfolio returns, assuming the correlation is 0.4. (Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.) |
| Portfolio variance |
| c. | Calculate the variance of portfolio returns, assuming the correlation is 0. (Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 places.) |
| Portfolio variance |
|
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Microeconomics
Authors: Douglas Bernheim, Michael Whinston
2nd edition
73375853, 978-0073375854
