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Question 6. (15 points) A portfolio consists of Stock Aand Stock B. Data for the 2 stocks is shown below. Stock A: expected return Stock
Question 6. (15 points) A portfolio consists of Stock Aand Stock B. Data for the 2 stocks is shown below. Stock A: expected return Stock A: standard deviation Stock B: expected return Stock B: standard deviation Correlation between A and B Stock A beta Stock B beta 12% 40% 14% 60% 0.35 0.90 1.20 % portfolio in Stock A % portfolio in Stock B 45% 55% c. Calculate the beta of the portfolio d. Does the portfolio have more risk, less risk, or the same risk as the market? Explain. e. Will your portfolio likely outperform, underperform, or perform the same as the market in a period when stocks are rapidly falling in value? Why
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