Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. standard deviation for portfolio of two risky inve

Standard Deviation for portfolio of two risky investments: Mary Guilott recently graduated from college and...

60.1K

Verified Solution

Question

Accounting

Standard Deviation for portfolio of two risky investments: Mary Guilott recently graduated from college and is evaluating an investment in two companies common stock. She has collected the following information about the common stock of firm A and firm B: Firm A's common stock: 0.17 (expected return), 0.13 (standard Deviation) Firm B's common stock: 0.11 (expected return), 0.08 (standard Deviation) Correlation Coefficient: .20 (expected Return)

a) If mary decides to invest 10% of her money in Firm A's common stock and 90% in Firm B's common stock, what is the expected rate of return and the standard deviation of the portfolio return? b) If mary decides to invest 90 percent of her money in Firm A's common stock and 10 percent in Firm B's common stock, what is the expected rate of return and the standard deviation of the portfolio return? C) Recompute your response to both questions a and b, where the correlation between the two firms stock return is -0.20 D) Summarize what your analysis tells you about your portfolio risk when combining risky assets in portfolio

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students