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Use the table for the question(s) below. Consider the following expected returns, volatilities, and correlations: Stock Expected Return Standard Deviation Correlation with Duke Energy Correlation
Use the table for the question(s) below. Consider the following expected returns, volatilities, and correlations:
Stock | Expected Return | Standard Deviation | Correlation with Duke Energy | Correlation with Microsoft | Correlation with Wal-Mart |
Duke Energy | 14% | 6% | 1.0 | -1.0 | 0.0 |
Microsoft | 44% | 24% | -1.0 | 1.0 | 0.7 |
Wal-Mart | 23% | 14% | 0.0 | 0.7 | 1.0 |
The expected return of a portfolio that consists of a long position of $10,000 in Wal-Mart and a short position of $2000 in Microsoft is closest to:
a.12% | ||
b.27% | ||
c.18% | ||
d.21% |
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