Question
Use the following information to answer the next three questions. Month Stock A Return Stock B Return 1/2013 .12 -.06 2/2013 .05 -.03 3/2013 .02
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Use the following information to answer the next three questions.
Month
Stock A Return
Stock B Return
1/2013
.12
-.06
2/2013
.05
-.03
3/2013
.02
.25
4/2013
.05
.16
Find the covariance between stocks A and B. Round intermediate steps and your final answer to four decimals.
.0037
.005
-.005
-.0037
5 points
QUESTION 10
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Assume that you want to combine stocks A and B in a portfolio with the lowest possible risk. Find the weight of stock A in your portfolio. Round intermediate calculations to four decimal places.
.8006
.1994
.1746
.8254
5 points
QUESTION 11
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Find the standard deviation of the portfolio you created. Round intermediate steps and your final answer to four decimals.
.1131
.0128
.0211
.0004
5 points
QUESTION 12
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If we allow investors to borrow and lend at the risk-free rate, everyone in the economy would always choose to hold the same set of risky assets.
True
False
5 points
QUESTION 13
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An investor wishes to construct a portfolio by borrowing 15% of his original wealth at the risk-free rate and investing in a stock index. The return on the risk-free asset is 3% and the expected return on the stock index is 20%. Calculate the expected return on the portfolio.
.1745
.1955
.2255
.2345
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