Question
You have invested 40% of your money in action A and the rest in action B. Your expectations are the following: A B Expected return
You have invested 40% of your money in action A and the rest in action B. Your expectations are the following:
A B
Expected return 1 0% 15%
Typical deviation 15% 25%
The correlation coefficient between A and B is equal to 0.5.
- What are the expected return and the typical deviation of your portfolio returns?
- How would you change your answer if the correlation coefficient were 0 (zero) or -0.5?
- This portfolio is better or worse than another in which everything would have been invested in Stock A, or is it not possible to say?
Step by Step Solution
3.40 Rating (153 Votes )
There are 3 Steps involved in it
Step: 1
1 Expected return Weight in Action A Expected return of action A Wei...
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Document Format ( 1 attachment)
60641f029f8f6_717585.docx
120 KBs Word File
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Fundamentals of Corporate Finance
Authors: Berk, DeMarzo, Harford
2nd edition
132148234, 978-0132148238
