FREE Trial
Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose you develop a mutual fund that includes 500 NASDAQ stocks, all with equal weights in the fund's portfolio. The average return standard deviation of

 Suppose you develop a mutual fund that includes 500 NASDAQ stocks, all with equal weights in the fund's portfolio. The average return standard deviation of the stocks is 44 percent, and the average pairwise correlation among the stocks is 0.30. What is your estimate of the standard deviation of the fund's portfolio?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

The standard deviation of a portfolio can be calculated using the following formula sigmap sqrtw12 s... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals of Investments

Fundamentals of Investments

Authors: Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey

3rd edition

132926172, 978-0132926171

More Books

Students also viewed these Finance questions

Question

★★★★★
L5 Which is the least intense form of supplier integration? Early supplier involvement in NPD Collaborative forecasting O insourced warehousing O Vendor managed inventory

Answered: 1 week ago

Question

★★★★★
13. What is a lower bound for the price of 3-month call option on a non- dividend-paying stock when the stock price is $50, the strike price is $45, and the 3-month risk-free interest rate is 8%?...

Answered: 1 week ago

Question

★★★★★
There are three assets, A, B and C, where A is the market portfolio and C is the risk-free asset. The return on the market has a mean of 12% and a standard deviation of 20%. The risk-free asset...

Answered: 1 week ago

Question

★★★★★
On January 2, 2013, Parker Corporation invests in the stock of Quarry Corporation. Quarry's book value is $4 million and its assets and liabilities are fairly reported. Quarry reports income of $3...

Answered: 1 week ago

Question

★★★★★
What is a customized résumé, and why should you have one?

Answered: 1 week ago

Question

★★★★★
Here are some important figures from the budget of Nashville Nougats, Inc., for the second quarter of 2018: The company predicts that 5 percent of its credit sales will never be collected, 35 percent...

Answered: 1 week ago

Question

★★★★★
Discuss the ethical guidelines from the American Evaluation Association.

Answered: 1 week ago

Question

★★★★★
Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP with respect to the accounting for cash and receivables.

Answered: 1 week ago

Question

★★★★★
Mitchell Fishing Charters has collected the following data for the December 31 adjusting entries: Click the icon to view the data.) Read the requirements. Requirement 1. Journalize the adjusting...

Answered: 1 week ago

Question

★★★★★
Balance this four-column account. What function does the PR column serve? When will Account 111 be used in the journalizing and postingprocess? Cash Acct. 111 Balance Date 201X Explanation PR Dr....

Answered: 1 week ago

Question

★★★★★
Vivian has a vested account balance of $140,000 in her employer-sponsored 401(k) plan. This year, Vivian's home was damaged during the incident period related to a qualified disaster, causing Vivian...

Answered: 1 week ago

Question

★★★★★
An automated, swinging security light, hanging from the corner of a 35 ft tall building, is lighting the ground in front of the building. The angle 0 (see image below) is increasing at a rate of 0.6...

Answered: 1 week ago

Question

★★★★★
A department has three machines. The following figures indicate the departmental expenses for the most recent month Depreciation of machinery Depreciation of building Repairs to machinery Insurance...

Answered: 1 week ago

Question

★★★★★
In this module, you will plan a diving trip. You will need to know estimates of the pressure changes that you will experience. For example, if you estimate reaching depths of 200 ft (61.0 m). The...

Answered: 1 week ago

Question

★★★★★
PROBLEM 3 Given Diagram 3.1, answer Questions 3.1, 3.2 and 3.3 Diagram 3.1 Fa = 2,120 N Ff = 103 N 2,200 kg Question 3.1 What is the resultant force acting on the object? Your answer Question 3.2...

Answered: 1 week ago

Question

★★★★★
This question is a compound true/false question with 6 questions. The answers to 3 of these are true and the answers to the other 3 are false. Choose only the 3 "true" ones. (Note that the grader...

Answered: 1 week ago

Question

★★★★★
Use the information provided below to prepare all necessary adjusting entries in the general journal. You will need to establish several new accounts. 1. As of May 31, the company owes its employees...

Answered: 1 week ago

Question

★★★★★
Which one of the following anhydrous chloride is not obtained on direct heating of its hydrated chloride? (A) BaCl2 (B) CaClz (C) MgCl2 (D) SrCl2

Answered: 1 week ago

Question

★★★★★
Pickles Dillhoefer owns a portfolio that during the past five years produced a 16.8% annual return. During that time the portfolio produced a 1.10 beta; the risk-free return and market return...

Answered: 1 week ago

Question

★★★★★
Is it true that in a perfectly efficient market no investor would consistently be able to earn a profit?

Answered: 1 week ago

Question

★★★★★
The price per share of the Dells Deli Corporation is less than its book value. Does this difference indicate that the firm's present shareholders have lost money in the past? Does it indicate that...

Answered: 1 week ago

Question

★★★★★
Which of the following situations are likely to involve adverse selection? a. After receiving an emergency call during class, a professor leaves students unsupervised for the rest of the period. b. A...

Answered: 1 week ago

Question

★★★★★
Say which public regulation approach is likely to be more effective in providing information to consumers of restaurant meals. a. Filing a notice at city hall when a restaurant fails a health and...

Answered: 1 week ago

Question

★★★★★
Say whether each of the following situations involves screening or signaling. a. Auto shops and motels advertise that they are AAA-approved. b. Employers check interviewees Facebook or MySpace...

Answered: 1 week ago

Previous Question Next Question