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Need help, cant figure out how to do these two problems 2. Stocks A, B, and C have the same expected return and standard deviation.
Need help, cant figure out how to do these two problems 2. Stocks A, B, and C have the same expected return and standard deviation. The following table shows the correlation coefficients between the returns on these stocks. Stock A Stock B Stock C 1.0 Stock B0.9 Stock C 0.1 1.0 0.4 1.0 Given these correlations, consider the following four portfolios constructed from these stocks. Which portfolio has the lowest risk? Explain. (a) Equally invested in stocks A and B (b) Equally invested in stocks A and C (c) Equally invested in stocks B and C (d) Totally invested in stock C 3. Stocks offer an expected rate of return of 18%, with a standard deviation of 22%. Gold offers an expected return of 10% with a standard deviation of 30%. (a) In light of the apparent inferiority of gold with regard to both expected return and standard deviation, would anyone hold gold? If so, demon strate graphically why one would do so. (b) Given the information above, re-answer part (a) with an additional assumption that the correlation coefficient between gold and stocks equals1. Draw a graph illustrating why one would or would not hold gold in one's portfolio
Need help, cant figure out how to do these two problems
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