Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

you know that as the number of stocks in an equally weighted portfolio is increased with each additional stock chosen at random the uniqueness of

you know that as the number of stocks in an equally weighted portfolio is increased with each additional stock chosen at random the uniqueness of the portfolio decreases you also know that a typical stock has a beta of 1 assume that the markets return have a standard deviation of 20% and that a typical stock returns have a standard deviation of 40% and a correlation coefficient with market returns of +0.5 .all else being the same what must be the true for the returns for such a portfolio as the number of stocks in it increase. a. its standard deviation decreasing and its correlation with the market decreases b.its standard deviation increases and its correlation with the market decreases c.its standard deviation stays is the same as its correlation with the market increases d.its standard deviation decreases and its correlation with the market increases

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 Directors Handbook

Authors: Glynis D Morris, Sonia McKay, Andrea Oates

5th Edition

1566768691, 978-1566768696

More Books

Students also viewed these Finance questions