Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You invest 39% of your money in Stock Y and the rest in Stock Z. The standard deviation of Stock Y's annual returns is 55%
You invest 39% of your money in Stock Y and the rest in Stock Z. The standard deviation of Stock Y's annual returns is 55% and the standard deviation of Stock Z's annual returns is 44%. The standard deviation of the portfolio's annual returns is 40%. By how many percentage points did diversification reduce your risk in this case? Write your answer out to three decimals - for example, write 6.2% as .062.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
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
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started