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Question 2 8 pts Assume that all the stocks available to investors in a market offer the same expected return and risk (E(r) = 15%
Question 2 8 pts Assume that all the stocks available to investors in a market offer the same expected return and risk (E(r) = 15% and standard deviation = 45% annually). Additionally, consider that the stocks have a common correlation coefficient of 0.2. a) What is the expected return of the optimal risky portfolio? [2 mark] b) What is the risk (standard deviation) of a portfolio containing 10 stocks? [2 marks) c) How many stocks would you invest in if you want the risk of the portfolio to be 21%? [2 marks] d) During financial crises, securities presumably become more correlated with each other. In such a scenario, what is the maximum theoretical risk of a portfolio containing 50 stocks? Explain. [2 marks] Edit View Insert Format Tools Table : o v V e Tv 12pt v Paragraph
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