Question
Suppose the expected returns and standard deviations of Stocks A and B are E( R A ) = 0.11, E( R B ) = 0.13,
Suppose the expected returns and standard deviations of Stocks A and B are E(RA) = 0.11, E(RB) = 0.13, A = 0.39, and B = 0.76.
Calculate the expected return and standard deviation of a portfolio that is composed of 35 percent A and 65 percent B when the correlation between the returns on A and B is 0.5.
Calculate the standard deviation of a portfolio with the same portfolio weights as in part (a) when the correlation coefficient between the returns on A and B is 0.5.
How does the correlation between the returns on A and B affect the standard deviation of the portfolio?
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Finance For Executives Managing For Value Creation
Authors: Gabriel Hawawini, Claude Viallet
2nd Edition
0324117752, 9780324117752
