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You are considering an investment in Stock A and Stock B. Your security analyst has estimated the returns on these two stocks as follows: a)
You are considering an investment in Stock A and Stock B. Your security analyst has estimated the returns on these two stocks as follows: a) Find the expected return on each stock. b) Find the covariance between the returns on Stock A and Stock B. c) The standard deviation of returns for Stock A (sigma_A) is 0.14151 (or 9.605%). Assume that you standard deviation of returns for Stock B (sigma_B) is 0.14151 (or 14.151%). Assume that you form a portfolio consisting of the two stocks with $4,000 invested in Stock A and invested in Stock B. i. Find the weight of each stock in the portfolio. ii. Find the expected return and standard deviation of returns on the portfolio consisting of Stock A and Stock B
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