Question
The following table contains data for three stocks. The 1st column contains expected monthly returns. The 2nd column contains the standard deviations of the monthly
The following table contains data for three stocks. The 1st column contains expected monthly returns. The 2nd column contains the standard deviations of the monthly returns. Columns 4-6 contain the variances and covariances of the monthly returns. E.g., the variance of JACK's monthly return is 0.0076. The covariance of JACK's and DLTR's monthly returns is 0.0021. 1) Suppose you have $5000. You short sell $5000 worth of JACK and invest $10,000 in AMZN. What will be the expectation and standard deviation of the monthly return of your investment? 2) Suppose you invest 1/3 of your money in each of the three stocks. What will be the expectation and standard deviation of the monthly return of your investment?
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