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USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Stocks A and B have a correlation coefficient of -0,8. The stocks' expected returns and standard deviations
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Stocks A and B have a correlation coefficient of -0,8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed. Stock Expected Return Standard Deviation A 20% 25% B 19% 15% 62. Refer to Exhibit 7.14. What is the expected return of the stock A and B portfolio? 2 12.0% b. 12.5% 18.0% d. 18.5% e. 19.0% ANS: A Expected retum-0.400.20) + 0.6000.15) -0,08 +0.09 0.17 63. Refer to Exhibit 7.14. What is the standard deviation of the stock A and B portfolio? a 0.0% 6.0.5% S. 41% d. 69 e./20.392 ANS: D The portfolio of stocks A and B has a standard deviation of 64. Refer to Exhibit 7.14 What percentage of stock A should be invested to obtain the minimum risk portfolio that contains stock A and B? a 15 1.42% c.58% 0.65% C. 72% ANS: B 65. What is the standard deviation of an equally weighted portfolio of two stocks with a covariance of 0,009, if the standard deviation of the first stock is 15% and the standard deviation of the second stock is 20%? 20% 1.2.1% c.17.89% d. 14.2% S. 14.7% ANS: D The correlation coefficient is 0.3 calculated as follows 0091.154.2). The portfolio sd
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