Question
Listed here are estimates of the standard deviations and correlation coefficients for three stocks. Correlation with Stock: Stock Standard A B C A 12% 1.00
Listed here are estimates of the standard deviations and correlation coefficients for three stocks.
Correlation with Stock:
| Stock | Standard | A | B | C |
| A | 12% | 1.00 | -1.00 | 0.20 |
| B | 15 | -1.00 | 1.00 | -0.20 |
| C | 10 | 0.20 | -0.20 | 1.00 |
a. If a portfolio is composed of 20% of stock A and 80% of stock C, what is the portfolio's standard deviation?
b. If a portfolio is composed of 40% of stock A, 20% of stock B, and 40% of stock C, what is the portfolio's standard deviation?
c. If you were asked to design a portfolio using stocks A and B, what percentage investment in each stock would produce a zero standard deviation?
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The Social Profit Handbook
Authors: David Grant
1st Edition
1603586040, 978-1603586047
