FREE Trial
Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You invest 60% of your money in Stock A and the rest in Stock B. The variance of annual returns is 31% for Stock A

You invest 60% of your money in Stock A and the rest in Stock B. The variance of annual returns is 31% for Stock A and 25% for Stock B. The correlation between the two stocks is 0.5. What is the standard deviation of annual returns for the combination of the two stocks? Go out three decimal places - for example, write 39.6% as .396.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance And Economics Discussion Series Tax Exhaustion Firm Investment And Leasing A Test Of The Q Model Of Investment

Finance And Economics Discussion Series Tax Exhaustion Firm Investment And Leasing A Test Of The Q Model Of Investment

Authors: United States Federal Reserve Board, Michael P. O'Malley

1st Edition

1288722370, 9781288722372

More Books

Students also viewed these Finance questions

Question

★★★★★
Answer the below questions. (a) How is an event defined in the Poisson process? (b) What is meant by the intensity parameter in the Poisson process?

Answered: 1 week ago

Question

★★★★★
EMC Corporation has never paid a dividend. Its current free cash flow of $530,000 is expected to grow at a constant rate of 4.5%. The weighted average cost of capital is WACC = 11.25%. Calculate...

Answered: 1 week ago

Question

★★★★★
=+your average total cost increased or decreased? Why? c. Suppose instead that you could produce one more (the fifth) widget at a marginal cost of $20. If you do produce that fifth widget, what will...

Answered: 1 week ago

Question

★★★★★
Give examples of industries that are affected by seasonality. Why would these businesses want to filter out seasonality?

Answered: 1 week ago

Question

★★★★★
You invest 60% of your money in Stock A and the rest in Stock B. The variance of annual returns is 31% for Stock A and 25% for Stock B. The correlation between the two stocks is 0.5. What is the...

Answered: 1 week ago

Question

★★★★★
Norway Hotel had net income for 2020 of $193,700. Included in net income was depreciation of $2,200, a gain on sale of land of $5,900, loss on sale of equipment of $11,700 and income taxes of $25,600...

Answered: 1 week ago

Question

★★★★★
Some statements are not considered hearsay because these statements are not being offered to prove the truth of the matter asserted in the statements. Thus, you must always ask yourself what is being...

Answered: 1 week ago

Question

★★★★★
21. Data: S0 = 100; X = 110; 1 + r = 1.1. The two possibilities for ST are 150 and 80. Calculate the value of a call option on the stock with an exercise price of 110. (Do not use continuous...

Answered: 1 week ago

Question

★★★★★
Car expenses using logbook and expense data Rory derives business income from a retail cosmetics store. On 1 October 2023, Rory bought a Mercedes for $38,340. Its effective life is eight years. Rory...

Answered: 1 week ago

Question

★★★★★
An analyst for Bloom Ltd, gathered the following information with regards to futures contract: Current spot-market price of R60 Risk-free interest rate of 8.87% per annum The six-month future...

Answered: 1 week ago

Question

★★★★★
Case 2: Maria Sosa is selling a 2015 Nissan Verson SV to Juan Rodriguez for RD$400,000.00 pesos. Juan Rodriguez tells her that he will pay Mrs. Sosa in cash. Analyze the case and then answer: Can Mr....

Answered: 1 week ago

Previous Question Next Question