Question
Suppose you wish to look into the investments on Stocks A and B. For each share of the stock, the return is given below: Return
Suppose you wish to look into the investments on Stocks A and B. For each share of the stock, the return is given below:
| Return ($) Per Share | ||
| Average | Standard Deviation | |
| Stock A | 5 | 1.0 |
| Stock B | 7 | 1.2 |
The correlation between returns of Stocks A and B is 0.2.
(a) Which stock has a higher risk? Explain your answer.
(b) Suppose your portfolio has 50 shares of stock A and 60 shares of stock B. What is your expected return in the portfolio?
(c) Suppose your portfolio has 50 shares of stock A and 60 shares of stock B. What is the standard deviation on the return in the portfolio?
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Sound Investing, Chapter 18 - Significant Accounting Policies And Changes In Them
Authors: Kate Mooney
3rd Edition
0071719407, 9780071719407
