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Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an expected return of 18% and a standard
Stock A has an expected return of 12% and a standard deviation of 40%. Stock B has an expected return of 18% and a standard deviation of 60%. The correlation coefficient between Stocks A and B is 0.2. Stock A has a beta of .85 and Stock B has a beta of 1.20. The portfolio is invested 30% in Stock A and 70% in Stock B.
d. Is your portfolio less risky or riskier than the market? Explain.
e. Will your portfolio likely outperform or underperform the market in a period when stocks are rapidly falling in value?
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