Question
Portfolio P consists of two stocks: 50% is invested in Stock A and 50% is invested in Stock B. Stock A has a standard deviation
Portfolio P consists of two stocks: 50% is invested in Stock A and 50% is invested in Stock B. Stock A has a standard deviation of 25% and a beta of 1.2, and Stock B has a standard deviation of 35% and a beta of 0.80. The correlation between these stocks is 0.4.
a. What is the standard deviation of Portfolio P?
b. What is the beta of Portfolio P?
c. Which stock is riskier to a diversified investor?
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Corporate Finance Theory And Practice
Authors: Aswath Damodaran
2nd Edition
0471283320, 9780471283324
