Question
Points) (i) Given the following information: Expected return on Stock A .15 (15%) Standard deviation of return 0.3 Expected return on Stock B .18 (18%)
Points) (i) Given the following information: Expected return on Stock A .15 (15%) Standard deviation of return 0.3 Expected return on Stock B .18 (18%) Standard deviation of return 0.4 Correlation coefficient of the returns on Stock A and Stock B 0.75 a. What are the expected returns and standard deviations of the following portfolios? 1. 100 percent of funds invested in Stock A 2. 100 percent of funds invested in Stock B 3. 50 percent of funds invested in each stock? b. What would be the impact if the correlation coefficient were -0.42 instead of 0.75?
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